When you're just starting out, house rent, utility bills, credit card debts, and groceries may seem like all you can afford. The situation is even worse during inflationary times when food, gas, or housing aren't as affordable as they used to be. However, once you've sorted out your monthly budget and have extra funds, you can begin investing. Knowing what to invest in—and how much to invest—is the hardest part.
You might think getting started with investments is scary, but it's also one of the most rewarding parts of managing your finances. While major market declines can be frightening, investing can help you grow your purchasing power and outpace inflation. Wealth can't be built with just a savings account.
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Getting started on investing is not an easy task for newbie investors, so you'll have many questions; among them: how much money do I need to start investing? What are the best investment strategies for beginners? The following tips will help you with how to start investing.
One of the best ways to see solid returns for your money is to invest when you're young. Your investment return starts to generate its own income thanks to compound earnings. With compounding, your account balance is able to see growth over time.
Your investment strategy and the amount should depend on your financial situation, investment goals, and when you need to reach them. Retirement is one of the most common investment goals.
In general, it's a good idea to invest 10% to 15% of your income each year for retirement. Although it may seem unrealistic right now, you can begin investing with a small amount and work your way up.
An individual retirement account (IRA), like a traditional or Roth IRA, is another option if you don't have access to an employer-sponsored retirement account like a 401(k). Retirement savings accounts tend to restrict your access to your money, so if you're investing for another purpose, you probably don't want to use them.
It may be a better option to open a taxable brokerage account from which you can make withdrawals at any time without incurring additional taxes or penalties.
The contribution limits for IRAs and employer-sponsored retirement accounts are often much lower than those for brokerage accounts, so people with maxed-out IRA retirement contributions may find brokerage accounts a good option for further investing.
The next tip is to decide which investments to make. You should understand each investment's risks, how much each instrument carries, and whether that risk matches your goals before investing. Among the best types of investments for beginners are:
In addition to offering competitive risk-adjusted returns, real estate can enhance an investor's risk-return profile. Real estate markets are generally low-volatile, particularly in comparison to equity and bond markets.
Residential and commercial real estate investments also offer attractive returns when compared with more traditional income sources. It is particularly attractive when interest rates are low for US Treasuries, as this asset class typically trades at a yield premium to them.
In addition to its diversification potential, real estate also offers a lot of tax benefits. The correlation between real estate and other major asset classes is low, and in some cases, negative—meaning that real estate often rises when other investments fall.
By adding real estate assets and trust deeds to a portfolio, volatility can be reduced and returns per unit of risk can be higher. Real estate investments with a higher degree of directness should yield a better hedge: public markets, such as REITs, will reflect the overall stock market performance.
No matter what purpose real estate investors use their properties for, whether rental profit or waiting for the perfect buy-and-sell opportunity when it arises, a relatively small amount of the property's total value upfront can be used to build out a robust investment program. Whether the market is up or down, real estate has potential and is profitable.
Investing in real estate can provide passive income if you do your due diligence and work with an expert company. Visit our website for more resources on real estate investing. Start investing your hard-earned money, email us at general@saintinvestment.com or contact us at 949-881-7128 at Saint Investment Group today!
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.
