The saying goes, ‘Now is the best time to start investing.’ For some beginners, this can be a daunting task, given the amount of information on the best investment with guaranteed returns. Other beginners will think that this is an easy way to make quick money and first dive into the markets.
This post is for amateur investors who are willing to make strategic decisions to protect their investments against unsustainable risk, but with sufficient latitude to pursue conservative opportunities that can generate capital gains, and learn the trade-offs.
In addition to a theoretical understanding of how financial markets work, it is essential that a beginner gain a real experience of the various strategies that investors use in their search for opportunities in the markets.
The following is a detailed description of the five best investment approaches suitable for beginners:
Exchange-traded funds (ETFs) offer a less rigorous opportunity to participate in stock exchanges. As a beginner, investing in ETFs is ideal because ETFs combine a variety of assets, including specific stocks, commodities and bonds, and tracked performance against an index. ETFs allow you as an investor to trade multiple assets as if they were a single stock. ETF diversification enables beginners to access a wide portfolio of stocks and bonds, providing convenience and reduced risks. Consequently, the flexible nature of ETFs allows the investor to trade flexibly with a choice of buying and selling at any time during the regular trading hours.
- Mutual fund
Mutual funds are ideal investment vehicles for beginners due to their two primary characteristics. First, the beginner is able to access the services of a professional trader in the name of a fund manager, despite the meager amount of capital, some as little as 25. Second, the investor faces minimal risk as mutual funds, such as ETFs, invest in various asset class portfolios of stocks, commodities and bonds in various markets and industries.
- Personal stock
After a detailed analysis of the past performance of individual stocks and the prevailing facts, individual stocks can provide a stable investment opportunity for beginners. However, care must be taken to ensure that investing in certain stocks does not worsen the risk tolerance level of your portfolio when a negative turn comes. Markets are not always predictable.
- Certificate of deposit
Depositing money in a bank within a specified period with a fixed and guaranteed return of capital and interest is a good investment opportunity for a beginner. Certificate of Deposits is insured and hence the investor is guaranteed capital plus interest on maturity. However, it is important to understand that access to this money is limited during the fixed investment period and may attract a loss of fees or interest in case of withdrawal.
- High yield savings account
This investment also includes savings for the sole purpose of gaining capital benefit from interest over a certain period of time. However, unlike the certificate of deposit, the interest is not fixed and therefore the interest is in accordance with the prevailing market rates. However the funds in this account are more liquid so easily accessible.