A Beginners Guide to Investing & Building Wealth Over Time
Saving money & building wealth doesn’t have to be confusing, here’s your beginners guide to investing!
So, you might have ended up on this page because you googled “ how do I start investing” or “investing for beginners”. And I’m here to try to answer your questions in easier to understand terms! Investing can be a great way to grow your wealth over time, but getting started can feel overwhelming. Don’t worry—I’ve got your back. Let’s break down the basics in a simple, no-nonsense way.
The Beginners Guide to Investing
What is Investing, Anyway?
At its core, investing is about making your money work for you. Instead of letting your hard earned cash sit idly in a savings account, you invest it in various assets (like stocks, bonds, real estate or even your friend’s business) with the goal of generating a return over time.
Why Should You Invest?
- Grow Your Wealth: Historically, investments like stocks have provided higher returns than savings accounts or CDs. This means your money can grow faster.
- Beat Inflation: Inflation erodes the purchasing power of your money. Meaning, over time, prices of goods & services increase. By investing, you have a better chance of outpacing inflation.
- Achieve Financial Goals: Whether it’s buying a home, funding education or retiring comfortably, investing can help you reach these milestones.
Types of Investments
- Stocks: Buying a stock means purchasing a small piece of a company. If the company does well, your stock value goes up. If it tanks, so does your investment. High risk, high reward.
- Bonds: These are like IOUs from companies or governments. You lend them money, and they pay you back with interest. Generally safer than stocks, but with lower returns.
- Mutual Funds & ETFs: These are collections of stocks and/or bonds. They’re like the smoothie of the investment world—diversified and managed by professionals. Great for beginners!
- Real Estate: Buying property to rent out or sell for profit. As you know, this is my personal preference for investing – head over to my Real Estate category of posts to read more.
- Savings Accounts & CDs: While not technically “investing,” these are safe places to stash your cash with minimal returns. Good for emergency funds, but not for long-term growth.
Getting Started: Step-by-Step
- Set Your Goals: What are you investing for? Retirement? A new car? Knowing your goals will help you determine your investment strategy.
- Understand Your Risk Tolerance: Are you okay with the ups and downs of the stock market, or do you prefer something more stable? Your risk tolerance will guide your investment choices.
- Educate Yourself: Read up on basic investment principles. There are tons of resources online, from blogs (like this one!) to YouTube channels and books.
- Start Small: You don’t need a fortune to start investing. Many platforms allow you to begin with as little as $50 or even less.
- Choose a Platform: There are plenty of online brokers and investment apps that make it easy to get started. Look for ones with low fees and good reviews.
- Diversify: Don’t put all your eggs in one basket. Spread your investments across different assets to minimize risk.
A Few Tips to Keep in Mind
- Don’t Try to Time the Market: Even pros get it wrong. Stick to your plan and stay consistent.
- Keep an Emergency Fund: Make sure you have some cash set aside for emergencies so you don’t have to dip into your investments.
- Be Patient: Investing is a marathon, not a sprint. It’s about growing your wealth over years, not days.
