You’ve probably heard that investing is one of the best ways to put your money to work.
The power of compounding can turn even modest savings into an appreciable nest egg over time.
If you saved $100 a month and tucked it away under your mattress, you’d have $36,000 at the end of 30 years.
But if you invested that same $100 a month and averaged returns of 8% per year, the $36,000 you’d set aside would have grown to more than $140,000 after 30 years.
But if you’ve never put money into the stock market before, the prospect can be overwhelming. What investments should you choose? And what kind of account do you need to get started?
Investing for beginners doesn’t have to be complicated. Here’s how to get started.
- 1 What Should I Invest in? 6 Types of Investments for Beginners
- 2 1. Stocks
- 3 2. Real Estate Investing
- 4 3. Exchange-Traded Funds (ETFs)
- 5 4. Mutual Funds
- 6 5. Cryptocurrency
- 7 6. Fine Art Investing
- 8 Investing for the Long Term
What Should I Invest in? 6 Types of Investments for Beginners
The stock market is the abstract space where investors buy and sell stocks. When you invest in stocks, you buy shares, or small pieces of ownership, of a company.
When you invest in stocks, you profit when the company performs well. You earn money in two ways:
- Your shares increase in value. If the company’s outlook is good, other investors will be willing to pay more money for your shares than you originally paid.
- The company pays you a dividend. That means it distributes part of its profit back to shareholders. Smaller companies issue dividends less frequently than larger ones. They often need to reinvest that money in the firm to keep growing.
An app called Stash lets you own pieces of well-known companies, like Amazon, Apple, Google and more for $5 or less. Seriously — with only a few dollars, you can invest in thousands of stocks and ETFs, which can help you grow your investing portfolio and reach your retirement goals.
The best part? Some companies may even send you a check every quarter for your share of profits, called dividends. If these companies profit, so can you.
It takes two minutes to sign up, and your investments are protected.
2. Real Estate Investing
It’s simple math. The world population grows every year, but the amount of land doesn’t. That basic equation means the value of land and the structures that sit on them become more valuable over the years.
Take a look at some of the wealthiest people. Chances are, they’re invested in real estate in some form or another. It’s easy to think this is something that’s out of reach for the average person, but there are ways for just about anyone to invest in real estate — and you don’t have to buy a chunk of land or become someone’s landlord.
You don’t need to be rich to invest in real estate. In fact, you could get started for as little as $10.
A company called Fundrise lets you get started in the world of real estate by giving you access to a low-cost, diversified portfolio of private real estate. The best part? You don’t have to be the landlord. Fundrise does all the heavy lifting.
Fundrise’s Starter Portfolio has a minimum of only $10 and is geared toward first-time real estate investors. Your money will be invested in the company’s Flagship Fund, which already owns more than $250 million worth of real estate around the country, from apartment complexes to the red-hot housing rental market to larger last-mile e-commerce logistics centers.
As tenants pay their rent, you could earn money through quarterly dividend payments, and over time, you could earn money off the potential appreciation of the property. Since 2014, Fundrise investors have earned roughly $100 million in dividends alone.
It takes just a few minutes to sign up and create an account with Fundrise.
3. Exchange-Traded Funds (ETFs)
Exchange-traded funds, or ETFs, are bundles of investments that are packaged and traded as a single investment. Buying shares in a single ETF allows you to invest your money in hundreds, or even thousands of companies. The best part: You can get started even if you don’t have much money, making them a great option for beginning investors.
Some ETFs are actively managed, which means that humans are choosing the investments. But the vast majority of these funds are passively managed, which means they attempt to mirror the makeup of a market index.
One way to invest in ETFs is with a tool like M1 Finance. Not only does it have some seriously powerful tools, it’s also easy to use. You can build your own custom portfolio of stocks, bonds and ETFs.
You can set up regular automatic deposits to funnel money to your investments. Any new money you invest will be used to rebalance your portfolio, bringing its percentages back in line with your goals.
Even better? Once you’ve deposited $1,000, you’ll get a free $30 bonus. It only takes a few minutes to sign up.
4. Mutual Funds
Mutual funds are prebuilt collections of stocks, bonds and other types of investment assets. Typically, mutual funds are designed and managed by financial professionals. However, some mutual funds are index funds, which means their makeup and performance are tied to a market index, like the S&P 500 or the Dow Jones Industrial Average.
Investing in a mutual fund allows individual investors to buy a diverse segment of the market without doing all the footwork to research and buy individual stocks.
Unlike stocks, mutual funds aren’t traded on the stock market. To buy and sell shares of a mutual fund, you have to go through the investment company that manages the fund. You can only do so at the end of the trading day.
Many mutual funds require an upfront investment of anywhere from $1,000 to $2,500, which may be steep for beginners.
In the broadest sense, cryptocurrency is simply another form of payment — like a U.S. dollar, a Mexican Peso or Japanese Yen. What separates cryptocurrency from traditional hard currency is its decentralized nature and the absence of something of real value tied to them.
Instead of a government regulating cryptocurrency, these digital dollars are governed by advanced math and massive networks of computers that passively verify each transaction. The technology behind cryptocurrency is known as the blockchain.
While some investors view cryptocurrencies as too new and too risky, others believe these currencies are the future, and they’ll only increase in value.
Though they still haven’t shed that risk, cryptocurrency continues to expand as investing platforms such as Robinhood increase support for these new currencies.
Make your first investment in cryptocurrency for just a few dollars. It’s free to buy and trade stocks, options, exchange-traded funds (ETFs) and cryptocurrencies. Plus, there are no account minimums and no maintenance fees.
6. Fine Art Investing
Every year, most of us are at least a little surprised to see pieces of art auctioned off at record prices. Sellers of such art often see their investment in these works accelerate past many of the strongest stocks.
On the more affordable end of the fine art market, you’ll likely find less consensus on value and more volatility as a result. So unless you have a true passion for art and the pieces you invest in, investing in the higher end of the market might be a more sound investment.
No, you don’t have to be a millionaire to invest in works worth millions. A company called Masterworks is making investing in multimillion-dollar artwork accessible for regular folks like us. It lets you buy shares of valuable historical masterpieces — and instead of needing to have $1 million on hand, all you need is $5,000 to get started.
Investing for the Long Term
Keep in mind that you’re investing for the long term. Market fluctuations are an everyday reality.
Although it can be tempting to rip your money out of the market when you see a scary headline, don’t look at investing from a short-term perspective. Diversify your holdings, and sit tight through the lean times. The market usually corrects itself over time.
*Past performance is not indicative of future results. The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.
Investing in securities involves risks, including the risk of loss. M1 Finance LLC is an SEC registered broker-dealer. Member FINRA/SIPC.