Are you looking for new ways to grow your money but not sure where to start? Or perhaps you're a beginner investor who is looking for guidance on where to start? Either way we have it all covered for you as we explore the smartest ways to help your money grow.
Investing Money The Smart Way
Regardless of the challenges over the past years it was confirmed that over 55% of adults within the U.S invested in stocks in 2020, leaving investors to boost entertainment levels by looking to seek profits as the world sat in tight restrictions.
Over the past 15 months, the world has witnessed millions of job losses, business closures and many more damaging effects brought on from the deadly virus, leading many to believe that making the leap into investing wasn’t the right time in 2020. But the truth is, just like when you hear many future parents stating, when is the right time and the same can be said with investing.
So long as you have the right mindset, carry the correct amount of knowledge and you are in a stable or relatively good financial position you can look to grow your money through the power of investing smartly.
You may be wondering what is meant by the term investing smartly. This terminology simply stands for knowing how to invest by understanding the key ins and outs of what to look for when looking to grow your money, as simple and as straightforward as that.
As your aim is to make your money grow you will learn to set your concentration on investments that can offer the largest possible returns. Whether it be from:
- Returns from stocks or other assets
- Dividends from dividend-paying stocks
- Interest from bonds and saving accounts
- Cash flow from personal businesses or real estate investments
Or investors can look to have a collective filled with a percentage of all investments above within their portfolio which is strongly recommended.
Aside from having many options that investors can seek to choose from within their investing journey it has also never been easier and at a lower cost, in some cases as low as $5 to begin your trading journey.
Online trading platforms make it extremely accessible for investors to place their investments, all thanks to evolving technology making it all possible.
Investors can place an investment from anywhere around the globe either via the company's website or by smartphone apps, with the added benefits of very little fees, access to international markets or in some cases, trading platforms that offer zero commission fees when placing your investments.
Because we are here to give you only the best guidance, an online trading platform that is proving to be the stand-out from the crowd is eToro.
This leading digital trading platform offers zero commission fees, low balance fees starting from as little as $50, has access to international markets and many more offerings for investors.
One additional advantage that this platform offers if you are a beginner investor is a virtual online trading platform where beginner investors can learn how to trade, right down to creating your own unique virtual portfolio. And this is all accompanied with $100,000 worth of virtual funds to practice until you're ready to take the leap and begin placing your investments in reality.
- Reasons As To Why You Should Look To Invest
- Investing For The First Time, When Is The Right Time To Begin Investing?
- Taking a Look at Different Investment Options
- Seeking Additional Guidance to Help Place Your Investment
- Overview: How to Invest Money: Smart Ways to Make Your Money Grow
Now we have given an insight into what is to come when looking to invest, now let’s break it down and take a look at the key points in how to invest smartly.
Reasons As To Why You Should Look To Invest
As you're reading this now this means you have already come to the realisation that investing can be extremely rewarding. As assets perform they will see strong price appreciation, but only if you invest wisely.
As we have already established you don’t have to invest huge amounts in order to become successful, you can start with very little. Once you gain returns from a stock you can then seek to reinvest back into your chosen investment, which is where the term compounding comes into action.
Compounding in short is the definition of reinvesting an asset’s earnings whether it be from interest from a bond or from capital gains that have come from a stock.
So imagine if you placed $5 into an investment of choice over the long-term, all thanks to compounding, your $5 could even be worth millions if it has had the time in order to reach this level, and secondly if the stock performs in such a way to be in receipt of such gains.
In reality, it's unlikely that many young individuals today are even thinking about investing. But if this is the case and you start investing within your teenage years you are more likely to see huge gains over the long-term outlook from a small amount from the form of interest payments, from investmenting into a savings account or an ISA that holds a reasonably good interest rate.
Two good savings accounts on the market that are good investment choices when starting out young to save for retirement are:
- Nationwide Building Society - 1 Year Triple Access Online Saver 11 Account.
The Nationwide 1 Year Triple Access Online Saver 11 has an age limit of 16 years plus and can be opened with a small deposit amount of £1 leading to £5 million. This saver has no notice period in order to withdraw funds, however, if you make 3 or less withdrawals within a 12 month period your interest rate will be 0.40%, if it goes higher your interest rate will reduce to 0.01% over the 12-month term.
- Paragon Bank - Easy Access (Issue 11).
Paragon’s Easy Access (issue 11) is an online savings account that has an interest rate of 0.25% and is available to any UK resident over the age of 18. This online savings account requires a minimum deposit of £1 leading up to £500,000 and you can choose to receive interest payments either monthly or annually along with being able to withdraw any funds at any point.
Based on Nationwide’s Triple Access Savings Account if you were to open an account at its minimum £1 and look to add £125 every month over the next 35 years based on an interest rate of 0.04%, this will total up to £52,878 with £377 coming from interest by the time you hit 51.
Of course you can add as much or as little as you wish each month it all depends on your financial position and how much you are looking to gain in the future.
Realistically in the world today you are more than likely going to be in your early 20’s at the earliest, if this thought comes across your mind to invest for retirement. But you can still look to gain similar or if not higher returns over the same period if you look for a savings account with a higher interest rate.
If we use the second savings account Paragon’s Easy Access (issue 11) as an example where you opened and deposited the minimum £1 at the age of 21, if you input £125 monthly into the savings account by the time you're 56 you will have earned £2,419 in interest with a sum of £54,920.
Both examples are on the basis of their current interest rates that can change over the years.
These are two prime examples of compound investing as you place your money into your savings account and it gains interest, your interest will also gain a little extra small interest.
In regards to Individual Savings Accounts (ISAs) these investments work similar to savings accounts but you can only reach a maximum of up to £20,000 due to the main key difference being that ISAs are not subject to tax. Yes, you heard this right you can earn up to £20,000 and not be eligible to pay tax on your earnings. And another great point to add is that you can have several ISAs at one given time.
Investing For The First Time, When Is The Right Time To Begin Investing?
As we have looked into why you should invest now it is time to look at when the right time is to start investing. And the answer to this question is just as simple, as soon as you can make the leap to begin investing.
We have already established that there is no perfect time to begin your investing journey, although if you are looking to invest in investments that are more complex such as stocks and dividend stocks, this is where your journey should begin with research before you look into placing your hard-earned money into such investments.
Many beginner investors may feel nervous and intimidated by the idea of investing in stocks as they picture the images from movies or what they see on TV. But in reality, it is further away from what you see in fantasy however you will adopt to one of the popular trading ways which include:
- Day-Trading - The image we discussed above is typically what you would relate to day- traders. These traders look to purchase a large volume of trades as they keep a serious eye on looking to capitalise on market price movements. This is the reason for the multiple screen action performed by traders. If your aim when looking to invest in stocks is to make quick price movements in order to gain capital quickly, day-trading or scalp trading are your go to strategies.
- Position Trading - On the flip side to day-traders, you have position traders. Position traders look to follow market trends in order to benefit from a stocks price appreciation in the long term. Once that goal is met a position trader will look to exit the investment at the right price, especially as the trend wears off and they will continue to seek new trends.
- Passive Trading - Passive trading along with day-trading are your most common strategies that beginner investors will look to use when first starting out. Passive trading is when an investor buys stock and holds it for the long-term, with very little trading involved. When you hear of the common phrase of the buy and hold strategy, this is the form of investing it refers to.
But a key point to remember is that you are on the flip side of the investing world, as regardless of what your preferred strategy is you will more than likely have a licensed broker in order to help place your investments. Meaning you are not going to be physically positioned in the think of the action like you see in the movies, yet you are positioned firmly into your investments.
On this note, when you are looking to invest you will see that there are many reputable online trading platforms on the market, which can be a big task within itself in picking the right platform for you.
If you are looking to seek help when looking to begin your journey personal advisors can give you one-on-one support and help place your investments for you.
Additionally, you will find that online trading platforms also benefit from helping hands that include Robo-Advisors and have a huge amount of educational material for you to explore and take part in online tutorials.
Vanguard Personal Advisor Service (VPAS)
Depending on your financial position, the Vanguard Personal Advisor Service (VPAS) is a relatively new service that is designed to work directly with you in order to understand and look at archiving your financial goals and needs. With as little fees of 0.30% a human professional advisor can help tailor your investments and manage your portfolio for you.
The minimum amount in order to open a VPAS account is $50,000 in free investable assets, which is about right compared to other firms.
If you are looking for convenience, minimum cost and unlimited access to most or if not all investments spreaded across international markets, we highly recommend eToro to meet your investment goals and needs.
Besides eToro offering a fantastic selection of benefits including convenience by allowing investors to invest from anywhere in the world, the online platform also offers help and guidance for beginner investors.
From simple questions and answers, to being able to connect and interact with other investors by taking advantage of the company’s CopyTrade technology, a service enables investors to copy other investors' portfolios.
Additionally, eToro offers a trading school where you can learn all the tricks and trades of investing. This trading platform is the best there is to offer.
Risk factors vs Rewards
There is no doubt or question about it, investing involves a lot of risk whichever route you decide to take. It can be economic or natural effects that cause such risks or even scams that take over and cause many investors to lose their fortunes. The lesson here is that it pays to be smart and wise when looking to invest in any asset.
A great take away point from this section is that the younger you begin investing the more likely you will hold a great long-term investment that can set you up for retirement, subject to discipline and budgeting wisely. This way you are already one step ahead with a safer investment compared to investing in stocks that hold high volatility.
If you are considering investing in stocks one key point to keep with you is that these investments are extremely risky. But it's best to be a part of an investment, correct the situation if an error occurs and learn from the mistake or unfortunate mishaps to become wiser and look to avoid this situation arising again in the future, as it can be more costly if you don’t invest at all.
Taking a Look at Different Investment Options
When you are just finding your feet in the world of investing it is best to keep things straightforward and simple to begin with, you don’t want to over complicate and overwhelm yourself from the get go.
The best guidance not just for beginner investors, but for all investors is to create a diverse portfolio made up of a variety of investments. This way it lowers your risk elements, offers you exposure to a wider range of industries and can look at achieving stronger returns.
Having a diverse collection of stocks, low-cost ETFs, bonds and mutual funds is strongly advised so long as you get the correct allocation. In simpler terms, having the right percentage balance within your portfolio.
For a beginner investor, it is wise to keep stock percentage at the minimum until you decide you are ready to further explore. Secondly, all investors must have an investment plan and ride with it all the way through despite challenges that may rise, as an investment plan is ultimately one of the tools that is going to help you create wealth throughout your investing journey.
Now we have mentioned the two points of action. Let's touch the surface on what investment options are out there for you to invest in.
Investing in stocks is a brilliant way to look at making your money grow as certain companies can grow as quickly as you imagine.
Take the impressive Amazon Inc (AMZN) as a prime example, this stock was once a small-cap stock in the late 90’s trading at just under $1 per share to where the company is now trading at $3,340 per share with a market cap of $1.69 trillion.
For beginner investor’s it is recommended to start off steady and take your time into this route, and potentially look to adapt value investing as your main priority.
Value investing is a strategy that investors will seek to pick out stocks that appear to be trading below their intrinsic value, but remember to hold a very minute percentage to begin with, definitely no more than 10% of individual stocks any more than this figure you are exposing yourself to stronger risk factors.
You are going to need plenty of time when looking to invest wisely into individual stocks but when you have done so and placed your investments, you will soon realise the hype is true and the advantages that these investments can bring can be extremely rewarding.
Probably the safest form of investment available today is that of bonds. Bonds are debt securities that raise capital for lenders which are used by companies, states and even governments. The loan is paid back to a borrower over a certain period of time and is normally subject to interest payments throughout the term depending on the agreement.
It pays to understand that there are different types of bonds available which include:
- Corporate Bonds - A corporate bond is when a company will issue bonds to look to raise capital. Investors who seek to buy these bonds will be returned with interest payments until the loan has been paid off. Investors can also trade these bonds on public markets like a stock can.
- Municipal Bonds - Municipal bonds are debt securities raised by states or local governments who are looking to raise money in order to help and establish local communities. One of the biggest benefits for these bonds is they tend to be interest free, which is a standout feature for many investors.
- Treasury Bonds (T-bond) - From all the bond investing options available, T-bonds are the safest option as they are almost certainly risk-free as these bonds are fixed government debt securities that typically range between 10- 30 years and interest payments are paid semi-annually to their lenders.
A newer form of investing into bonds is that of investing in Worthy Bonds. Worthy bonds are a great way to diversify outside of Wall Street for a little cost of $10 and offer a fixed return of 5%. These bonds hold a fixed term of 36 months but you can withdraw your earnings from your bond at any time with no penalty.
3. Mutual Funds and ETFs
The similarities between Mutual funds and Exchange-traded funds (ETFs) is that they both are professionally managed investment funds that pool money together in order to buy securities.
The key difference between the two types of investments lies within the way that they trade. ETFs will be traded throughout a trading day, whereas mutual funds only look to be traded at the end of each trading day as these funds are more actively managed and typically see more changes within a 24h period.
Both funds will seek to give investors exposure to a collection of investments that can be spread across various industries creating a wider diversified portfolio without you having to do anything other than investing your money, it's as simple as that.
Both of these investments are brilliant options for a beginner investor as not only are they a much safer choice compared to stocks, they are also cheaper to invest in which is why investing in these funds is highly recommended when beginning your journey.
4. Real estate
Investing in real estate has been known for many years to make investors very wealthy.
And one of the benefits in today’s society from investing in real estate is that you don't need to be a wealthy individual in order to begin this route of investing as there are various mortgage options available to fulfil your investing goal into real estate.
Investing in real estate is a long-term investment as assets appreciate over time and provide a regular cash flow when you consider renting out properties. Typically, the perks for an investor, in this case, is that as inflation plays its part, your mortgage payments should stay the same so it will increase the amount of free cash flow.
But one piece of advice to consider is to look at having a pot of money saved for a rainy day, just in case any major maintenance works need to be carried out. Nethertheless, investing in real estate is still a rewarding and solid favourite amongst many individuals across the world.
Crowdfunding has become a popular form of investment over recent years as it enables individuals to invest in large new business ventures.
Simply put individuals group their finances together in order to create a large business or invest big into property, then say if they were trying to do so on their own.
Real estate crowdfunding has become one of the main avenues for this form of investing in order to seek higher returns.
If this form of investment sounds like something of interest take a look into CrowdStreet Connect. The CrowdStreet platform enables investors to invest a minimum amount of $25,000 into various real estate investments and has received annual returns between a range of between 11.5% to 26%, subject to investment type. Fees do apply on all investments that range between 0.50% to 2.5% and vary subject to investment.
Seeking Additional Guidance to Help Place Your Investments
If you're a beginner investor that is sitting in a wealthy position and is seeking extra guidance in order to help with your investment plans, perhaps looking for a financial advisor is a more suitable option than others.
Having a financial advisor on hand will help you determine what your investing goals and aims are, along with sharing their first-hand expertise on where you should consider placing your money in order to receive the biggest gains or receive the best benefits.
This route of action is a more personal form of looking to invest as meetings are carried out face-to-face providing that personal one-on-one client service, whereas if you were to choose a Robo-Adviser, this route can be impersonal as you will have limited non-human interaction and can be less beneficial if it is more advanced guidance that you are requiring.
Here are two financial service firms to consider:
- Facet Wealth - The next generation financial investment firm offers $0 upfront fees, pays flat fees instead of commission fees and price ranges from $1,200 to $6,000 annually.
- Vanguard financial planning service - An investor will need up to $50,000 to open an account, 0.30% management fees, a remote team of financial experts when you have at least $500,000 in your account. Vanguard is a great financial service if you are a large account holder and aiming to keep costs low when seeking ways to invest.
What is a Robo-Advisor?
Robo-Advisors are automated investing platforms that look to use algorithms to provide the best investments that suit your financial needs.
Robo-Advisors are extremely popular amongst investors as they are easily accessible, simple to use, affordable and most of all they are convenient to fit in around your everyday lifestyle.
If you are a beginner to investing Robo-Advisors are a great way to enter the investing world as they will take care of placing your investments and will look to create a portfolio tailored around your needs based on your investing information provided.
Overview: How to Invest Money: Smart Ways to Make Your Money Grow
If you are new to investing and are looking for a great way to invest for the long-term, sticking to safer investments such as savings accounts, ISAs, and ETFs are perfect long-term investments options that can grow well over time and look to set you up all the way to retirement.
Likewise investing in bonds is another safe way of limiting risk yet receiving regular interest payments.
If these options don’t seem to fulfill your investing needs or maybe you already have invested in one or more of the above, then you can seek to open an online brokerage account via an online trading platform to look at investing in an array of investments such as stocks, ETFs, mutual funds and much more.
One final point to be made aware of when going down this route is to know that whatever profit you make from capital gains will more than likely be subject to tax, so it's worth factoring this point into the equation right from the beginning.
And there you have a simple guide in how to invest smartly. By adopting and understanding all of the guidance above we are sure that you are placing your way to a brighter future by building a healthy investing pathway that looks set to grow - smartly.
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