If you are one of the millions of young adults in this country and you’ve been considering investing, congratulations! You’re already ahead of the majority of the other millennials out there. But don’t pat yourself on the back just yet. You still need to do the work to get the ball rolling. But what’s the best way to get started? It may seem difficult, but it doesn’t have to be. Here are some tips that can help you get started investing right away.
Make a Budget
Don’t roll your eyes or sigh with boredom. If you’ve been researching and reading anything about personal finance, most likely you have seen this tip at least once. Why? The answer is that it’s a logical starting point. So, grab a notepad or set up a spreadsheet on your computer and get started so you can determine how much money you can set aside for investing. You can even use a free online tool like Mint to help you with your budget and tracking your spending.
Consider Different Investment Opportunities
There are many different ways to invest, and some involve more risk than others, so you should look each option over carefully before deciding how you want to get started investing. You could also take advantage of investment diversity by investing in at least a couple of different ways. That way if one doesn’t work out, you haven’t put all of your eggs in one basket.
Diversification based on different investment vehicles and underlying assets classes can make the difference between going bankrupt when a certain market crashes and staying afloat. Besides stocks, bonds, funds and real estate other available options are: foreign currencies , cryptocurrencies, soft and hard commodities and derivatives. For example currency option trading presents both an investment vehicle and a hedging instrument.
Some people think putting money into savings is the same as investing. While it’s a great idea to build up an emergency fund in a savings account for easy accessibility, you likely aren’t really earning anything off of this money. Savings accounts often have very low interest rates. Even high interest rate savings accounts are still very low compared to what you should try to earn from an investment.
Highly recommended reading: If You Can: How Millennials Can Get Rich Slowly
Investing in stocks might sound scary, but it’s actually easier than you might think. But that’s not the only thing you can invest in. You could invest in real estate, although you’ll likely need some liquid assets saved up in order to buy an investment property.
Another option would be to make sure you are investing in your 401K if you are eligible for one at your job. If not, you could always open an IRA instead to save and invest for your retirement that way.
Invest Free Money When You Can
Stop! There’s a way to get free money? In a way, the answer is yes. If you are working for a company offering to match your 401K investment, you should take full advantage of this if you can. The amount of money you can accumulate from your employer match is a great way to begin investing without all of the money coming out of your pocket, and the amount you invest is taken out of your pay pre-tax. This means you may not notice its absence quite as much when you get paid – you can’t spend what isn’t there!
When deciding which funds to put the money into, consider including funds that are lower risk, medium risk, and some that are higher risk. Choosing the largest percentage of money to go into the higher risk category is generally a good idea for millennials because with high risk comes high reward, and if you are planning to use this money for retirement, you have a long term timeline to save and invest.
Of course with high risk funds there’s also a greater chance of loss, but you can probably make that up over time. Generally speaking, this money will remain as an investment that grows over time, and most of these types of investments do show good growth rates even when there are downturns over a few months or years. This means you need to look at the long term growth rates of funds when making your decisions of where to put your money and don’t panic if the market drops.
Keep in mind, the list above is not the only way to get started investing for your future. However, now that you have a couple of ideas of how to get started investing, you should be able to put a plan into action and rest easy by letting your money go to work for you.
Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.
*Image Credit: Pictures of Money