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The saying goes something like this ‘The best time to start investing is now’. For some novices, it can be overwhelming considering the amount of information on the best investments with guaranteed returns. Other newbies think it’s an easy way to make a quick buck and dive head first into the markets.
This post is for the amateur investor who is ready to make a strategic decision to de-risk their investments, but with enough latitude to pursue conservative opportunities that will yield capital gains, and learn the ropes of trading in the meantime. Let’s learn
In addition to a theoretical understanding of how financial markets operate, it is essential that a novice has real-world experience of the various strategies that investors employ in pursuit of opportunities in the markets.
Following are detailed explanations of the five best investment approaches suitable for beginners:
- ETF
Exchange-traded funds (ETFs) provide a less strenuous opportunity to participate in the stock exchange. As a beginner, investing in ETFs is ideal because an ETF bundles together a number of assets, including specialized stocks, commodities and bonds, and the performance is tracked against an index. ETFs allow you as an investor to trade multiple assets as if they were a single stock. The diversification of ETFs enables beginners to access a broad portfolio of stocks and bonds offering convenience and low risk. As a result, the flexible nature of ETFs allows an investor to trade flexibly with the option to buy and sell at any time during regular trading hours.
- mutual funds
Mutual funds are ideal investment vehicles for beginners because of their two primary features. First, a beginner is able to use the services of a professional trader named fund manager despite a modest amount of capital, some as little as $25. Secondly, the investor is exposed to minimal risk as mutual funds, like ETFs, invest in a diversified asset class portfolio of stocks, commodities and bonds across different markets and industries.
- personal stock
After a detailed analysis of an individual stock’s past performance and prevailing facts, individual stocks can provide a stable investment opportunity suitable for beginners. However, care must be taken to ensure that investing in particular stocks does not disturb the risk tolerance level of your portfolio in case of a negative turn of events. Markets are not always predictable.
- certificate of deposit
Depositing money in a bank over a specified period with a fixed and guaranteed return of capital and interest is a good investment opportunity for a beginner. Certificates of Deposit are insured and hence the capital and interest are guaranteed to the investor on maturity. However, it is important to understand that access to this money is limited during the stipulated investment tenure and there may be charges or loss of interest in case of withdrawal.
- High Yield Savings Account
This investment also includes savings for the sole purpose of earning capital gains from interest over a specified period of time. However, unlike Certificate of Deposit, the interest is not fixed and hence the interest is as per the prevailing market rates. However the funds in this account are more liquid hence easily available.
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