Investing for beginners: Easy investment tips for millennials
What is investing?
Investing is a way of obtaining additional income and building your wealth by putting money into something with the expectation of a positive return. You are allocating money for the future with hopes that the profits would grow over time.
In this article, we share a few easy investment tips for beginners.
Determine your goals and how much you can invest
Whether it is BD50 ($132) or BD500 ($1,326), your money will grow with compound returns.
By first determining how much you can afford to invest, you will be able to set an investment plan and target, which can help find the motivation to stick with this plan.
The constraints of living expenses with a smaller income may prevent you from investing as much as you would like, at least initially – however, by keeping course, you should be able to increase this amount as your income increases over time.
Determine your risk tolerance
Investments always come with risks – they also come with potential returns. Generally, the riskier the investment, the higher the potential reward.
Your risk tolerance plays a big role in helping you decide how to invest your money. Invest according to the risk level that’s right for you. To determine your risk tolerance, determine your investment timeline and how much risk you can take. Generally, the longer your time frame, the more risk you can take on.
Long-term vs short-term investment strategies
It is famously said to not put all your eggs into one basket. Long-term and short-term investments are determined by how you use them.
Long-term investments are those that you know you’re likely to keep for a long period of time. Assets like stocks and real estate are generally long-term investments. This is good for when you are seeking to grow your portfolio, protection from inflation, and meet your goals several years in the future.
Short-term investments are those that you plan to use within a shorter period time. Short-term investments might include assets like bonds, cash, and annuities. This is often associated with a stable income and is good for when you want a regular source of income.
You need to consider both long-term and short-term goals and choose investments that reflect your objectives.
Invest early and as much as you can
As we have already stated, investing helps your money make money with compound earnings. When you reinvest your earnings to earn additional returns, this is called your compound earnings. The earlier you start investing, the more benefits you will gain from compounding. Time is the most essential element of investing because money grows over time, and the more time you have, the more opportunity your money has to grow.
Investing, even in small amounts can reap big rewards.
Cultivate good wealth-building habits
The key to building wealth is developing good habits and a good start would be to save small amounts of money and reduce spending on non-essential habits such as buying a Starbucks coffee every morning and ordering in a fast food dinner every night.