How to Start Investing in Stocks: A Beginner's Guide (How to Invest in Stocks for Beginners)
Investing in stocks has been proven time and time again as among the most reliable income generators in the long run. However, for beginners, the mere thought of investing in stocks can seem daunting and even scary at first. To help ease your mind and wash away your worries, this short guide will introduce you to the world of stock investing so you can proceed with your journey with lesser burden on your shoulders.
What are Stocks, Anyway?
A stock is a part-ownership of a business. A business is like a pizza. When you divide it into slices, every pizza slice represents a share of the business. The main objective here is to create a portfolio of growing and strong companies for you to take advantage of their growth and success. A company that does well will earn more money that will let them pay higher dividends to its stakeholders. Companies with growing dividends and show quality growth also benefit from higher share prices in the long run. However, it is worthy to note that while stock market returns are often positive in long-term, they have the tendency to be volatile in short-term.
To get started with stock investing, here are some steps you can follow:
Identify What Type of Investor You Are
There are primarily two ways to invest in stocks. You can be a DIY investor or you can outsource the job to professionals. Going DIY is better if you want to be more hands-on in choosing equity funds and stocks. Meanwhile, you can let the professionals handle everything on your behalf if you consider stocks as good investments in the long run but you want someone else to oversee the process.
Determine the Allocation for Stocks in Your Investment Portfolio
The general rule of thumb is to avoid investing money you will need in the next 12 months or 1 year. While investing in stocks has overwhelmingly positive long term returns, the short term ones tend to be very volatile. Before investing in stocks, you have to ensure that you already have an emergency fund in place as well as enough money for paying off all your borrowings such as mortgages and credit card bills.
How much you allocate for your stock investment is totally dependent on whether you can tolerate volatility or not. Don’t forget that stock prices can fluctuate in a span of 12 months. For some, this is comfortable but others don’t find it so.
What is important here is that you know your own comfort level when you decide on the allocation you want for your stock investment.
Open a Brokerage Account
A brokerage account is necessary when investing in stocks. There are numerous companies where you can open one. One of the biggest benefits for modern investors is how much the costs of trading have gone down for the past few years.
There are even online stockbrokers that have completely removed trading commissions. The key differentiators among brokers are their trading platforms, research platforms and educational tools.
Every platform has its weakness and strength so make sure you conduct a research first to determine the broker that best suits your needs.
Investing in stocks shouldn’t be a daunting prospect. As long as you know what to do, you can be well on your way to having a positive investing experience!
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What are the Top Investment Options for Retirement?
Retirement is that stage in your life when you can finally enjoy and take advantage of all the fruits of your hard work. But before you reach this phase, it is important to be familiar with the best investments that can generate income on a regular basis to help you live comfortably once you are past your prime years.
So, what are the top investment options for retirement, then?
1. Immediate Annuities
From the name itself, you can deduce that immediate annuities offer guaranteed income right away. These are a type of insurance instead of investment but they still belong to this list as they offer steady flow of income. Immediate annuities are good options if you find it hard to stick to your spending limits, you cannot follow your investment plan or you don’t have monthly income sources aside from Social Security.
2. Retirement Income Funds
These are great investments for people who don’t want to monitor their portfolio all the time. Retirement income funds are mutual funds that invest your money automatically in a diversified portfolio of bonds and stocks. The goal of these funds is to generate income every month. Many people are familiar with mutual funds that make them more comfortable with having retirement income funds. Similar to mutual funds, these are also set up to give you access to your money any time you need or want.
Bundled in funds or individual bonds are loans given to corporations, municipalities or governments that pay regular interest to you. Once bonds reach their maturity, you can get back their face value. Bonds have lower risks compared to other forms of investments so their returns are also often lower. You can buy bonds not for the purpose of growing money but for their regular interest income and for guaranteed principal you can get once they mature.
4. Real Estate Investment Trusts
Real Estate Investment Trust or REIT is a type of mutual fund that combine real estate holdings such as commercial structures, apartment building, vacation properties and others. Professionals will supervise the properties for a fee. They will also pay expenses and collect rent and you will get the remaining income. Being part of a diversified portfolio, an REIT can be a great choice for investment when you retire.
5. Rental Real Estate
More work and hands-on approach is required if you will rent out property to earn an income once you reached your golden years. If you plan to invest in rental properties, it is best to research and give it careful thought. Before deciding to be a landlord during your retirement, you have to think of the expenses that your rental property will incur during the timeframe you plan to have the property under your ownership. These include natural disasters, maintenance, damage from careless renters and such. Vacancy rates must also be considered.
Remember that these are investment options for retirement and not tools for financial planning. Always come up with a feasible retirement plan first before buying financial products.
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Pension, Retirement and Investment Goes Well Together
Pension, retirement and investment are three words that go well together for a good reason. It is not enough that you just save up as much as you can. If you want a comfortable retirement, you need to plan for it carefully and part of that planning would be your investment and pension.
Investment and Asset Management
Until now, chances are your strategy was focused on monetary accumulation. But if you are already retiring, you have to rethink about asset management.
You might be withdrawing cash from your accounts for retirement instead of accumulating so you might want to reallocate some assets you have into investments meant to meet all of your short-term needs. However, you might still have very long term needs for 20 years or so. If this is the case, an approach for long term investment remains necessary.
It is common for retirees to be averse to risks. With the absence of a steady working income, they worry about the unexpected dwindling of their nest egg and their first reaction is to seek investments with very low risks.
Before changing your portfolio mix, don’t forget that your retirement goal is to be financially independent for the rest of your life. It means that you have to consider the impact of inflation, the market and longevity on your portfolio.
Importance of Pension
Everyone looks forward to that time when they can finally retire. The state pension is enough for some people to offer a basic income level. Others might have the chance to acquire wealth without pension schemes, such as through business ventures and assets.
However, many people still wish to supplement the investment and existing nest egg they have with a pension scheme of one form or another. Most employers also understand that even if their employees are still working, it is important for them to build up a pension entitlement once they retire.
There are several benefits associated to pension arrangements and these include the following:
Decide on Your Retirement Lifestyle
If your goal is to stick to your lifestyle at the moment, the general rule of thumb is that it could be 80% of your present expenses. Such estimate that may differ based on individual circumstances is according to the assumption that you will have a lower cost of living since work-related expenses will be eliminated such as restaurant lunches, dry cleaning and commuting costs.
However, most financial experts suggest that you plan maintaining 100% of your existing costs or even more. There are retirees that even need more money due to their travel plans and other forms of expensive recreational activities. You also need to factor in the increasing healthcare costs.
At the end of the day, if you want your retirement to be as comfortable as possible, pension and investment are two things that you should be paying attention to as early as now.
Copyright BestInvest.app 2020-2022
How to Invest for Profit in Times of Recession
Can you invest and earn profit during a recession?
While this question might seem contradicting, did you know that not all hope for investment is lost if the markets are bad? How is it possible, you ask? Well, don’t forget that your habits for investing don’t also go on a literal recess if there is a recession, which means that it is still possible for your money to continue growing.
The good news is you can do it profitably and healthily. Check out these tips on how to invest for profit in times of recession:
1. Watch Out for Good Stocks
To be more specific, make sure you keep a close eye on stocks of companies that sell or produce essentials, including those food manufacturers, supermarkets and large retail chains. These stocks often suffer from less impact when there is a recession since their products enjoy constant demand. This only means that there is a reduced risk that their stocks will fluctuate even if the economy is on a decline. You can also invest in stocks of companies that have low DE or debt to equity ratios, particularly if their prices are lower during recessions.
2. Embrace Some Bonds
Bonds are famous for being stable even when there are changes in the economy provided that you purchase a bond from a bank or other reliable institutions. To make things even more exciting, you have plenty of options to choose from during recession as far as bonds are concerned since more institutions will try to offer them to increase emergency funding whenever necessary. You can also invest in bonds with longer periods of maturity if you think that it will only be a short-live recession.
3. Turn Your Real Estate Dreams into Reality
If you are wondering if you should invest in real estate and property when there is a recession, the short answer is a big YES. Most of the time, recessions make property prices drop considerably steeply and quickly since consumers usually focus more on saving money and dealing with high living costs instead of searching for real estate. As a result, the property supply exceeds the demand. However, don’t forget the dip is often a short one. It means that if you bought a property during the start of a recession, you can sell this property at a decent profit once the economy is on the road to recovery.
4. Pay Attention to New and Small Businesses
Economic challenges force organizations and businesses to evolve in their attempt to survive and grow during recessions. It is for this reason that you should keep an eye out to businesses with unique offerings, particularly the smaller ones, if there is a recession. Putting your investment in such companies during economic struggles is a move that can give you high profits, especially when they survive and start to flourish when the economy recovers.
5. Warm Up to Precious Metals
Putting your investments in precious metals such as gold is a very wise move, such as during recessions. The reason is simple. The prices of these metals see positive growth rates after some time, including economic downturns that make them a secure vehicle for investment.
These are some of the ways on how to invest for profit in times of recession. Just remember, though, to research and be prepared to prevent disappointments.
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What are the Best Online Investment Sites?
Now more than ever, there are so many ways to invest and grow your money in tenfold. With the help of technology, people can choose where they will put their cash and how they will manage it. The presence of the internet has also paved the way to the rise of online investment sites that made investing so much more convenient.
Whether you have already decided to start your investment journey or you simply want to improve your current strategy, the following are some of the best online investment sites that can help you achieve and reach your goals:
1. TD Ameritrade
TD Ameritrade is a well-trusted and established service. It is renowned for its services that educate traders together with the access to mutual funds that are recommended as wise options, especially for traders who still have limited experience. While the fees might be a bit expensive, you can still have the peace of mind knowing that you will be getting one of the best services in the industry.
eToro is the favorite platform among people with limited time for investment and those who are completely new to the venture. With more than 11 million users all over the world, eToro is a type of multi-asset social investment platform that lets you invest and trade everything, including CFD assets, stocks and cryptoassets. eToro also has a very famous copy trading feature that lets you monitor real traders and what they do in real time so you can copy it automatically. Users of the site in Europe and the UK who want to invest in stocks can do it with no commission. It means that they can buy and hold real asset stocks.
It won’t be a surprise if you are familiar with E*Trade. After all, the company has more advertisements than the rest in this list or it may seem this way if you frequently watch TV. Valued partly for quick execution, E*Trade is a high end mobile platform with a plethora of research tools to help users learn even on the go so they can learn about the best decisions in trading. The fees for the site may be a bit expensive but you can take advantage of their mobile optimization and marketing strength.
4. Fidelity Investments
For those long term investors who want a more straightforward online investment platform, Fidelity Investments is the best go-to option. With its reasonable fees per trade, you can expect to get a good service from a reliable site that also happens to be well-rounded and trustworthy.
5. Ally Invest
Despite being a newcomer compared to the rest of the sites above, Ally Invest has managed to become one of the mainstream investment platforms today. It offers several advantages such as the appealing fees that entice younger traders. Ally Invest also works as an alternative option for banking and investing in the platform makes the transition easier for people who are already using its banking services.
These are just some of the best online investment sites that you can check out for your venture.
Copyright BestInvest.app 2020-2022
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