Everything You Need to Know to Start Investing

Thinking about investing? You aren’t the only one.
Thousands of Americans begin investing each year and some are delayed from investing because they simply don’t know when or how to start. In this white paper we will explain everything you need to know about investing including when to start and what to invest in.
Start! By scrolling down

Start! investing early

The Importance of Early Investing

There are many logical reasons to start investing at a young age, even though most people won’t start until they approach retirement age. This is often due to people not knowing much about investing or thinking that they’re not financially able to invest. The thing to remember is that you don’t have to be rich or old to invest. In fact, many of the rich get rich from investing.

What is compounding?

Money grows the longer it is left alone due to a process called compounding Compounding is the process of interest earned on top of interest. If you invested $2000 a year into an investment portfolio or retirement account for 20 years ($40,000), compounding can grow this money to over $300,000 in an additional 20 years. By the 20th year this money would have already grown to over $87,000 (using a 10% compound interest model). With compounding, the sooner you start investing the better the return; the later you wait to invest the harder it is to see a real return on your investment.

Use this compound interest calculator to see how much your money will grow.

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The Hidden Benefit

One benefit to early investing that doesn’t seem to be a huge bonus as far as growing your money, but it improves your current lifestyle and athat’s the fact that investing teaches you better spending habits. If you know you have to have a certain amount of funds available to live and to invest, you will be much less likely to overspend or to create opportunities for debt. The most important thing to remember about this point is that it only really works when you invest sooner than later. Investing after incurring debt doesn’t benefit anyone, but the creditors who will inevitably collect your funds plus interest.

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One of the Pluses to Early Investing

Another big plus to investing earlier is having a better life after retirement. You see it all the time, commercials about social security benefits changing and how seniors are often forced to live right on the poverty line—don’t let this be you. If you invest in a ROTH IRA (individual retirement account that offers future tax breaks) at a young age you’ll be less likely to experience that kind of lifestyle. In fact, you’ll be abortab and afford things that most people retirement age would only dream of having.

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Start! with compound interest

The Power of Compound Interest

We briefly outlined the main benefit of compound interest in the above section, but here we’ll explain what compound interest is and why it grows your money so exponentially.

The Definition of Compound Interest

Okay, so we said that compound interest is exactly what the name implies—interest on top of interest, but there is a little more to the process than that. Investopedia gives a wonderful definition, which is that compound interest is interest that accrues on the initial principal and the accumulated interest of a principal deposit, loan or debt. This allows the principal amount to grow much faster than simple interest would grow it since it is interest on interest instead of only allowing the money to grow by a set percentage (simple interest).

Things to know about compound interest:

Who Benefits from Compound Interest?

Compound interest works for everyone. True, you may not see a huge improvement in your principal amount right away, but this is a tool that is meant to give you a better return over time.

Start! our own portfolio

What is a Portfolio?

What does it mean?

When you begin investing you’ll no doubt hear the word portfolio tossed around a few times, but you may not know what it means. A portfolio is a folder containing a combination of financial assets , stocks, bonds and cash. This portfolio can be kept by you or managed by professionals in finance, which include financial institutions.

Why is it important?

A Portfolio is a necessary part of investing especially if you plan to invest over a long period of time, or if you plan to invest in a variety of different things. The reason why it is so important is because it holds information about you risk tolerance and investment objectives.

Portfolios also hold information about you risk allocation, which is calculated based on the value of each asset within the portfolio. Risk allocation is used to calculate your risk/reward ratio. This information is imperative and is often used to keep people from investing in things with more risk than reward in the short term.

However, it’s important to remember that if you’re investing in stock, the riskier it is, the more chance you’ll have at earning a greater return (This is the exception to the rule in most cases).

Start! your $1,000 investments

What are good investment ideas for $1,000?

When people first start investing, they are worried about having to invest a large amount of money with several risks. The truth is, you can start with as little as $10, but the best return starts on investing at least $1000; and there are several investment options that have little to no risks.
Social Lending

Social Lending

Some provide an annualized net return of up to 12%.

IRA account

IRA 

Take advantage of compound interest with a Roth IRA..

Mutual funds and bonds

 

Bonds 

Investment grade corporate and government.

Stocks

Options 

Great for small accounts and offers outstanding leverage

 

Start! your $10,000 investments

What are good investment ideas for $10,000?

Obviously, with more money you’ll have more investment opportunities.
Stock Funds

ETFs 

Exchange Traded Funds are a great altenative to Mutual Funds.

Open an IRA

IRA

Remember the compounding interest examples given above?

Invest in your Own

Invest in your Own Education

Start making a better future for yourself starting now. Remember the compounding interest examples given above?

Buy Stocks and Bonds

Stocks and Bonds

It’s better to start in the stock game early. If you have some setbacks, this is to be expected, but it is much easier to recover from them at an early age than

it is once you get older. Remember the more risky, the higher the return. But if you want less risk, you should start off investing in investment-grade corporate and government bonds