By Annystin Bexley
Investing helps build your wealth. As it directs a part of your finances to a profitable venture, you are able to earn and save a sizable amount that can go towards financial goals. This could be being debt-free by a certain age or owning real estate. The Balance also explains how investments help you earn enough so that you have enough money to sustain yourself when you no longer want to work. This is, of course, guided by a retirement plan that factors in your current financial circumstances, daily expenses, and the deadline you set for your labor exit.
Though all these benefits make investing enticing, you may not know how to start. Know that, there are ways to invest that even beginners are well capable of.
Open a high-yield savings account
The simplest way to invest is to open a high-yield savings account. In this setup, you earn 20 to 25 times more than average earnings from the regular savings account. The rest of the features associated with high-yield savings accounts work essentially the same as a regular savings account: you can deposit, withdraw, and receive bank payments in the form of interest.
However, the high-yield savings method is more apt for entry-level investing and short-term goals. CNBC’s guide to high-yield savings explains that this investment method is the most low-risk option you can go for. Any amount of capital you put into it is FDIC-insured, and the yield it provides you is larger than what you would get from a traditional savings account. High-yield savings accounts also don’t require a minimum deposit and don’t charge monthly fees, so it’s a great entry point into the world of investing.
Make wise stocks purchases
A lucrative investment method is to buy well-performing stocks and hoard them long-term. According to Maryville University’s guide to stocks and other forms of investment, this particular asset is considered “stable” compared to high-risk investments like cryptocurrency. As long as you buy shares from a company that you know is still going to be making big money in the coming years, your earnings should grow.
Furthermore, Yale University’s leading economist Robert Shiller adds that stock market-economy relations are very weak. Instead, he explains that stock trading behavior is more influenced by narrative. Such is why when trading stocks, looking at company reputation and performance is more effective than assessing economic conditions. With that said, a wise stock decision should be based on careful research about a company’s profits and earnings, employee management, and public perception.
Invest in a benchmark index
Like high-yield savings, index investing is relatively low-risk. In fact, in our explainer titled ‘Index Investing 101’, we note that when you buy an index fund, your money is distributed among all the businesses of the sector you bought from. That sector is called the benchmark index.
Though it sounds technical and highly specialized, index investing is actually a good entry point for beginners because of its low fees.
This type of investment, as opposed to stocks, witnesses only gradual buildups of wealth as investors buy index funds rather than buy and sell stocks. The most common strategy is to purchase index funds from benchmark indices like the S&P 500, which comprises leading companies in the United States. This is because investing in well-run companies minimizes risk.
There are many ways to start building your wealth by investing. The best investment method, however, will be based on the resources that you have and the investment setup that you prefer.
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