Nowadays most young people are starting to invest in stocks or cryptocurrencies at a young age. It may be illegal, but hey you’re learning something about investing. One thing to note about investing is that it won’t make you rich right away and it also has risks. Some coach told me once “high risk equals high reward”, this can be equated to many different life scenarios, here it’s for investing. Most of the time investing is trial and error but there are ways to make your odds better and become more successful over time. Let me start by introducing the different types of investment:
- Bonds: People can purchase bonds becoming creditors that lend money to a government or company at a certain interest rate for a period. After purchase they’re given a maturity date which is when their principal is supposed to be repaid.
- Shares: Where you can buy a stake in a company, involved with stocks
- Property: Residential or commercial properties purchased with the intention of earning a financial return. So, they generate income through renting or property value appreciation
- Cash: Short-term investments that earn interest through a certain percentage
- Mutual funds: A mix of investments combined allows investors to pick a bunch at once and is generally less risky compared to other types of investments.
- Exchange-traded funds: Like mutual funds, they can be purchased together. But the difference is that ETF’S trade during the day like stocks and purchased for a share price.
When preparing to invest it’s important that you’re aware of the financial risks involved with it. Keep in mind that the money you invest is not directly from your account (unless you want it to be), it’s better if you set aside a portion of money over a span of a few months, making sure that you pay short term loans and bills beforehand.
The main principles to keep in mind when investing:
- Accessing your current situation
- Define your short-term and long-term goals for this investment
- Evaluate the risks
- Decide what type of investment to make
Short-term investment accounts include high yield savings accounts, money market accounts, short-term bonds and CDs (Certificates of Deposit). These are good options since they offer higher interest rates and have more liquidity.
Long-term investment options consist of 401k accounts, Roth IRA’s, CD’s and 529 plan. There are more types available, but these are ones that are good to start investing in at a younger age. Mainly the 401k and Roth IRA are better to start early, but still, it’s good practice to save for when you’re older and planning to retire.
Overall, there are many options available on the type of investment you can make. You can make your own investment strategy based on your savings goal and depending on your situation it might be a good option for you to try and seek advice. I’ve listed additional investment resources in case you’re interested in learning more.