Investing 101: Crucial Information for Newbies

Investing 101: Crucial Information for Newbies

By: Elise Gray - Posted in:
Booker calculating stock prices and the best investments

What is Investing?

Making smart money decisions by adequately assessing risk and jumping on opportunities to generate a profitable return. In a broader sense: investing means forking over some funds now, for a large return later.

Truth be told, there are a million different ways one can invest whether it’s through stock market trading, forex trading, investing in a company, CDs, Roth IRAs, or buying property. Some of these might be too complicated to go all in, so why not dip your toes in with some of our suggestions? We want to offer a step by step guide for someone who has never opened an account. If you don’t know where to go, what to purchase, or how much certain things cost, we’re here for you. We’ve created a list to make it a little easier on you.

Investing for Beginners

Smart Investing Image

If you’re a rookie investor and are looking to get yourself out of debt, then you might want to try investing. A large part of investing is never to put in what you’re afraid of not getting back. You wouldn’t lend money you don’t plan to get back, so don’t invest money you don’t plan to get back.

Investing is a risk, but risks can have some significant payoffs. Take into account that your net-worth is comprised of all the things you own. If you own a house or car outright, then that is considered part of your portfolio. Retirement and investment accounts are common investments people make as well. You might consider placing your funds into one of the following categories if you’re starting out:

Mutual Funds

Essentially, mutual funds are bundles of stocks with varying differences. Mutual funds are a good choice if you plan to put money away on a monthly basis. Consider mutual funds to be a pool of money created by various companies, organizations, and investors. The best part about mutual funds? Money management.

A fixed-income manager can look over your account and assess the highest yield with the lowest risk, so you don’t have to! If you’re terrified of investing because you don’t want to lose an obscene amount of money, try a mutual fund. If you have a brokerage account, buy mutual fund shares! You can also request information from a fund’s website to get started.

Exchange-Traded Funds (ETFs)

People like exchange-traded funds because they can be bought or sold at any time. However, they’re still a pool of assets. What makes an exchange-traded fund different from a mutual fund? The trades a similar to the common stock, eliminating its net asset value. An ETF issues share of the pool of stocks, and you can trade it like you would a normal stock ––all day long. If you’re an ETF shareholder, you’re earning money off of the dividends that are paid out. ETFs do not have minimum deposit requirements, which makes them an attractive option to low-risk investors.

Roth IRA

Roth IRAs are a good investment if you’re starting out. What is a Roth IRA? It’s an individual retirement account that lets you stack up your income each year. If you withdraw or earn anything on your Roth IRA after you’re the age of 59½, you’ll be happy to know that the funds will be tax-free. If you’re trying to save money, being tax-free is the bomb.

Roth IRAs are amazing because you’re not the only one paying for them. You’re taking the money from your retirement funds, which your employer has paid a percentage of, and investing it. What could be better than this? Investing is fun anyway, but when it’s someone else’s money, it’s even better! If you’re going to start investing, this might be the perfect way to do it. Investing for beginners gets tricky, but with a Roth IRA, a lot of the tough stuff is handled for you. We encourage you to check out your options before committing, but we swear by Roth IRAs.

A Mortgage

I had a friend whose mom purchased a small two-bedroom house in Koreatown in the late 70s on a 15-dollar-an-hour wage. Today, that home is worth over $300,000. If she wanted to sell it, she would get double her money back. You can take your profit and buy a cheaper home somewhere else, and do it all over again. You can also take that investment and put it in the bank and invest it in a mutual fund. Once you’re working with $100,000 or more, the options are endless. Some people are even happy taking their profits and buying their next home outright. Wouldn’t you say that not having a mortgage is an investment in itself? The key to investing in a home is knowing the market, understanding the value of your property, and making smart financial decisions before purchasing/getting lending.

Forex Trading

Similar to mutual funds and other stocks, Forex trading is worth investing in if you’re smart. If you know how to trade and understand the value of different currencies, you’re going to be amazing at this. Forex trading is investing, but it’s different. Today we’re going to get into a specific type of trading: Forex Trading. What exactly is Forex? Otherwise known as foreign exchange, FX, or even currency trading, Forex is a decentralized world market where all of the currencies of the world are traded.

With a volume of over $5 trillion flowing in and out of it every day, this can be a lucrative investment for anyone looking to profit. Investing requires research, and Forex trading is no different. The exchange rate will always fluctuate, and so you need to be on top of your game. Even the difference of a penny can become a  big deal, depending on the exchange rate. You can trade up or trade down.

Why Should You Be Interested in Investing?

I suppose the short answer is, “Well, you want to be rich, don’t you?” However, depending on who you are, the answer can be complicated. Some people are merely math geeks who enjoy numbers games. To put it lightly, investing is basically gambling for rich people. Both require a certain level of skill and deceit. What is investing? Pure tactics.

However, whenever you’re diving into investing for beginners, it’s wise to take it easy. Maybe dabble in a quick 401(k) investment here or a stock exchange there. Think twice about jumping head-first into every investment opportunity that comes your way. You need to have an understanding where your money will be going.

Investing for Beginners

You’re going to ask yourself, “What is investing and why does it matter?” many times along the way. It’s a fair question based on our previous gambling scenario. But if you have the extra time and funds to play around with, investing can be worth the risk. It’s all about the amount of time you’re looking to put into it. Research markets that interest you. If you like a particular brand, see how their numbers look. Do you like a specific sport? Explore the company backing them. Once you decide to embark on this journey, you’ll be surprised at how many investment opportunities you come across. In fact, you’ll be probably be investing more than you ever thought possible!

Lasting Advice

What is investing? We say that patience is key. Investments are long-term goals. You can rarely expect the boom that took place with Bitcoin to be a common thing. Even with cryptocurrency, some of those people did wait a while before the Bitcoin market spiked – everyone else who jumped in after just got lucky because the value of cryptocurrency works differently. If it’s going to take a long time to earn, you’re in luck. Think about all the people who invested in Apple before Jobs struck gold, where are they now?

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