A key focus of my blog is Financial Literacy/Money. There are several aspects to money. There is basic money management and then there is the world of investing. There are a lot of things to consider when entering this realm. The following contributed post is entitled, 5 Diversified Investments For Beginners.
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Finding a way to increase how much money you make is something everyone’s thought of, but finding something that fits is difficult. You mightn’t be able to get a raise or promotion at work, and it could be impossible to work more hours. You mightn’t even have the time for a proper side hustle.
You’re not out of options, however. Investing can be a great option. It doesn’t take much upfront cost, and you wouldn’t need to spend hours on it every day. You could still be nervous, as it can seem like a risky and stressful experience.
With the right investments for beginners, it doesn’t have to be too large of a problem. Focusing on certain investments and knowing what you’re doing could be enough to make you a decent side income.
Five diversified investments could be worth starting out with.
What To Consider As A New Investor
Before diving into the best investments for beginners, it’s worth knowing what to consider before you start investing. You’ll need to know as much as possible so you can actually do it right, and so you can make a profit. Some of the more notable factors to consider as a new investor include:
● Financial Goals – By knowing your financial goals, such as how much of a return on investment you want, you can much better define which investments will help you get there.
● Risk Tolerance – Every investment comes with some degree of risk, but not all of them are the same. Some will be much riskier than others. By knowing your risk level, you can rule out anything that’s too risky for you.
● Taxes – Investments always affect your taxes, but they can do so in different ways. Make sure you’re informed about this before investing in anything.
Once you’ve considered these, you shouldn’t have a problem figuring out the right investments for you. Five options stand out with this, and are more than worth considering.
Investments For Beginners: 5 Diversified Options
1. IRA
An individual retirement account (IRA) is quite popular, as it lets you save up to $6,000 a year. If you’re over 50, that jumps to $7,000. There are two types of IRA to choose from, both of which can be appealing. These are:
● A traditional IRA, which lets you put pre-tax funds into your account, which are then taxed when you withdraw them.
● A roth IRA, where your money grows tax-free, and you wouldn’t have to pay any taxes on them.
The main difference between these two is the tax. While there’ll be different mechanics and processes at play with both, you’ll only really notice how it’ll affect your tax status.
2. Cryptocurrency
Cryptocurrency is seen as one of the more volatile investments for beginners, but it can lead to a great profit if you know what you’re doing. Knowing the top crypto coins is one of the more notable of these areas, but you should also focus on choosing the right digital wallets, platforms, and similar areas.
With a bit of research and effort, however, it can reap dividends. It’s better off starting small with this before building your way up as you feel more and more comfortable. Since you can invest in crypto from your phone, there shouldn’t be a problem looking after this quickly and easily.
3. Health Savings Account
Health savings accounts (HSAs) can be a much more appropriate investment than you’d think. It not only puts money aside for any health emergencies that come up, but it boasts quite a few tax benefits. You can add money to the HSA pre-tax, and any growth in the account is tax-free.
Any eligible funds you spend from this can also be tax-free. You’ll have to be eligible for a HSA before you can open one, with there being three main criteria:
- Having a high deductible health care plan without any other coverage
- You’re not someone else’s dependent
- You’re not a Medicare recipient
If you meet each of these, it’s well worth considering opening a HSA.
4. Emergency Fund
Not all investments are stocks, bonds, and similar accounts. Sometimes, it’s worth investing in yourself in case something comes up. An emergency fund is one of the more notable ways you can do this. While nobody expects something to come up, they can be an unfortunate part of life.
These will almost always come with a wealth of surprise costs, many of which you mightn’t be able to afford. It can be more than enough to throw your finances out of whack. There are many of these you might want to be prepared for, including:
● Health emergencies
● Car breakdown
● Losing your job
By having an emergency fund, you can make sure you’re prepared for these. Starting small and putting a certain amount away for emergencies every month could be enough to get this done.
5. Brokerage Account
When many people think of investing in stocks and bonds, they picture taking part in the stock market. As natural as that is, you don’t need to be as hands-on as you could expect. With a brokerage account, you can make it much easier. These are accounts with your bank, which then buys and sells investments on your behalf.
You don’t even need to do this through your bank, as there are more than a few online platforms that let you do this. While you’ll have to pay a fee for this, it’ll usually come in the form of a commission. It’ll be tied to how much profit or trading volume takes part. That gives brokers an incentive to do well with your account.
Investments For Beginners: Wrapping Up
With the right investments for beginners, you could be making more of a consistent return than you’d think. Knowing what to consider before investing and focusing on the right areas before doing anything is all you’d need to minimize the risk and increase your ROI.
You wouldn’t even need to consider risky stocks when you’re doing this. A health savings account, emergency fund, brokerage account, and similar options can all be great options for this. While they could take some time for you to see a profit, they should be relatively risk-free investments.