Investing your hard-earned money should never be taken lightly. It requires careful consideration and strategy that should be approached seriously. In a world where tempting high-yield accounts are a dime a dozen, it’s important to look beyond the flashy numbers and weigh the risks properly. As the saying goes, not all that glitters are gold. Even if you’re starting, it’s possible to make smart investment decisions that help you preserve your capital and make a decent profit. Whether you’re a seasoned investor or a newbie, Puai Wichman identifies the best investment options for beginners. So, before you jump into any investment opportunity, consider your options carefully and make informed decisions.
If you’re thinking about dipping your toes into the world of investing, it’s important to remember that good financial discipline should be at the forefront of your mind. One way to ensure you’re not caught off guard is to establish an emergency fund before exploring different investment opportunities. This fund should ideally cover around three to six months’ worth of your costs, so you’re prepared in case something unexpected happens. Without an emergency fund, you may be forced to sell your investments before they have a chance to mature, resulting in significant losses. Remember: patience is key, and getting your finances in order before you start investing is always a smart move.
High-Yield Savings Account
In the saving world, everything seems to be a bit upside down. High-yield savings accounts, which should offer customers tremendous returns, are slightly better than the usual ones. It is no secret that with inflation, the value of your saved money is decreasing by the day. But when it comes to high-yielding savings accounts, you can expect interest rates that are comparatively better than a standard savings account, says Puai Wichman. Usually, locking up your funds for a specific period may seem scary, but it works in your favor here. Importantly, even though you won’t have immediate access to these funds, you can still use them in case of any emergency, like a car repair or a broken boiler. You will find that a high-yield savings fund is a safe and beneficial choice for your rainy-day fund.
Certificates Of Deposits (CD)
Certificates of deposit, or CDs, are a popular investment option for those who prioritize ease and safety. While they may offer a better interest rate than a high-yield savings account, there is often a trade-off: locking your savings away for a specific period. Whether six months or five years, you must be prepared to leave your money untouched until the certificate matures. It’s worth noting that while CDs are a lower-risk investment, they may not be the most financially savvy option over the long term. If inflation continues at its current rate, you could lose money slower than with other investments. Ultimately, Puai Wichman strongly suggests deciding to invest in CDs must be carefully considered and based on your needs and goals.
401(k) and other Retirement Plans
401(k) plans are one of the regular employees’ most common retirement options. It’s a smart first-time investment for beginners and can help prepare them for retirement, especially since many employers will match an employee’s contribution up to a certain percentage. It is essentially free money that can grow tax-free until retirement age. However, it’s important to note that 401(k) plans are not an investment but a type of tax-advantaged account. While the investment options may be limited, it’s a great way to build good financial habits. Who knows if the dollar will even exist when we reach retirement age? So why not take advantage of a 401(k) plan and invest in your future?
Mutual Funds and ETFs
Mutual funds and ETFs are great options for newbies entering the market. One of the simplest and most cost-effective investments is the S&P 500 index fund, which follows a broad market index. But beware, Puai Wichman mentions that mutual funds tend to come with higher fees due to management, and there’s no guarantee that your profits will be higher. Studies show that active funds, which come with higher fees, often have lower returns than passive funds that track the market. So, if you want to invest without breaking the bank, consider a passive fund and let the market do the work for you.
Puai Wichman is the founder and CEO of Ora Partners, an international trust provider and wealth management firm.