What comes to mind when you hear the word “Investments?” Do images of stocks and bonds run through your head? Do you think of what seems like an impenetrable maze of financial buzzwords while well-dressed stockbrokers scream “Sell!” or “Buy!” into their phones? Does the whole thing seem rather intimidating? Or perhaps you think that the whole concept of investing is a bit too rich for your blood?
Well, you don’t need to be a wolf of Wall Street (or any other sort of carnivorous predator for that matter) to participate in and benefit from the world of investments. Here are some investment tips that you can implement as quickly as your next paycheck.
If you’re just starting to get your feet wet in the vast ocean of investments, you may want to consider doing it by means of a collective fund. A collective investment fund, sometimes called a CIF, is a fund that is operated by a bank or trust company. They purchase a wide variety of assets using the pooled funds of customers to create a larger, well-diversified portfolio. If you have no idea where to begin investing, then they’ll take care of the guesswork.
Investing takes discipline and consistency. It can be difficult to remember to set aside money to invest regularly, so consider having it done automatically as a payroll deduction. The classic example of this practice is investing in a 401K through work. This way, you not only learn to live within a budget that’s dictated by your pay after the invested amount is deducted, you’re also building up your own investment portfolio with minimal effort. And don’t forget that there are tax benefits to consider as well! After all, 401K deductions are pre-tax. You get taxed on the remainder, and there have been instances where some people have actually had more net pay because the 401K deduction dropped their gross pay into a lower tax bracket!
Just like when planting a garden, the seeds in the ground take time to mature and bear fruit. When it comes to investments, the rewards are a long-term proposition, measured in years (possibly even decades), depending on how much you’re investing and in what. But plan for that money that you invest to be out of your reach for years to come. Some conventional wisdom says that before you really get into investing, you should make sure to set aside between three to six months’ worth of living expenses to hedge against unplanned for situations and emergencies. If your budget is tight enough as it is without having to take this step, then don’t let the lack of a backup discourage you from starting to invest, anyway. The money set aside is merely a suggestion. At the very least, kick a twenty into your savings account every pay period and just let it accumulate.
If there’s one tip that you should make sure you take with you after you’re done reading this is the idea of diversifying your investments. The biggest advantage of diversification comes to light when one asset is performing poorly, because it’s likely that a different asset is performing better. In other words, if you commit funds to different investments, it’s less likely that all of those assets would be declining. As a means of diversifying, consider spreading your money around a bit, investing in stocks, bonds, money markets, commodities, and whatever else that circumstances allow. That way, no matter how the markets are behaving, it’s very unlikely that you’ll be taking a bath clear across the board. That’s why diversification is one of the most important of these five simple investment tips.
As you ponder these tips, bear in mind that everyone’s situation is unique. There’s no magic solution that produces “can’t fail” results. But one thing’s clear: you should definitely invest some of your assets as a hedge against the future and the uncertainties it brings, and do it as soon as possible. Even if you only do a little, a little is better than nothing.
And if you have debts that are cramping your investment style, then it may be a wise idea to find a way to relieve your debt burden.