The saying goes something like ‘the best time to start investing is now.’ For some beginners, this can be tedious, given the amount of information about the best return on investment. Other beginners will think that this is an easy way to make money quickly and dive into the market.
This post is for the amateur investor who is willing to make a strategic decision to protect his investment from exposure to unsustainable risk, but with enough freedom to follow conservative opportunities that bring in capital gains while learning the ropes of trade.
In addition to a theoretical understanding of how financial markets work, it is imperative that a beginner gain a realistic insight into the different strategies investors use in their search for market opportunities.
The following is a detailed explanation of the five best investment approaches suitable for beginners:
Stock traded funds (ETFs) offer less rigorous opportunities to participate in the stock market. For starters, investing in an ETF is ideal because the ETF brings together several assets including certain stocks, commodities and bonds, and the performance that is monitored against the index. ETFs allow you as an investor to trade several assets commonly as if they were a single stock. The diversification of the ETF allows beginners access to a wide portfolio of stocks and bonds, providing convenience and reduced risk. Accordingly, the flexible nature of ETFs allows the investor to trade flexibly, with the choice of buying and selling at any time during regular business hours.
- Mutual funds
Mutual funds are pooled investment instruments ideal for beginners because of their two basic characteristics. First, a beginner can access the services of a professional trader on behalf of a fund manager despite a modest amount of capital, some as much as $ 25. Second, the investor is exposed to minimal risk because mutual funds, such as ETFs, invest in a diverse portfolio of asset classes of stocks, commodities and bonds in different markets and industries.
- Individual stocks
After a detailed analysis of the past performance of individual stocks and the prevailing facts, individual stocks can offer a stable investment opportunity suitable for beginners. However, care should be taken to ensure that investing in a particular stock does not impair the risk tolerance level of your portfolio in the event of a negative development. Markets are not always predictable.
- Certificate of deposit
Depositing money in a bank for a certain period of time with a fixed and guaranteed return on capital plus interest is a good investment opportunity for beginners. The certificate of deposits is secured and thus the capital plus interest is guaranteed to the investor at maturity. However, it is important to understand that access to this money is limited during the projected investment period and may cause fees or interest losses in the event of withdrawal.
- High-yield savings account
This investment also involves savings solely for the purpose of gaining capital gains from interest over a specified period. However, unlike the certificate of deposit, the interest rate is not fixed and therefore the interest rate is in line with prevailing market rates. However, the funds in this account are more liquid and are easily available to them.