Published on April 4th, 2019
Investing early-on is key to financial security in later life. In fact, people who don’t start saving until 45 need to save three times as much than if they started at 25, according to the Center for Retirement Research at Boston College.
And the younger you are, the more freedom you have to take investment risks — which provides you with greater profits over the long term. If you’re interested in investing, but it sounds too complicated, you’re in luck.
There are several types of investments which are relatively simple and risk-free for beginners.
1. Index Funds
Index funds are an easy, low-cost, and low-risk way for newbies to get started investing, as recommended by Warren Buffet. An index fund consists of several funds in one big package — there’s no need to select individual stocks, which simplifies things for you. The rate of return depends on the net performance of each of the companies included.
Since index funds don’t require the time and expenses involved in trading, they’re low-maintenance, cost-effective, and you’ll save a lot in taxes. The minimum investment for the Vanguard S&P 500 Index Admiral, for example, is just $3000 and has a yield of 2.1%.
2. Gold Bullion
Gold is the ideal choice for a beginner precious metals investor — it’s a highly liquid investment mainly powered by investment and jewellery demand. Even though gold’s more expensive than silver, it’s less volatile.
Profit tends to be highest during times of economic uncertainty, Money Metals Exchange advises. Investors use gold to diversify against risk in a volatile market. Make sure to invest in actual, physical gold bullion, such as, bars, coins, and ingots.
Avoid electronic and paper gold, which is less secure. Once you’ve bought and received your gold from an online dealer, keep it in a safe. It’s a physical asset which needs protecting against theft and loss.
3. Exchange-Traded Funds
Exchange-traded funds (ETFs) are also appropriate for beginners. A single ETF holds a categorized group of assets — like a group of stocks, currencies, or government bonds. Profits are based on collective net performance.
Your rate of return depends on payouts from the individual assets, as well as trading profits. You’ll have to pay broker fees, but this is no more expensive than any other regular trade. ETF expense ratios are actually lower than average. For example, the expense ratio of the SPDR S&P 500 ETF (SPY) is currently only 0.09%.
Whether you’re a newbie or experienced investor, diversifying your portfolio is essential. Always do thorough research so you can be confident in your choices. In fact, beginners should seriously consider hiring a financial advisor to create a unique investment plan that suits you.