Many people are unaware that investing is not just for the rich. The internet gives everyone a chance to invest their money in stocks, bonds, mutual funds or real estate. The investment roadblocks that existed 20 years ago are long gone. Today, new investors enjoy plenty of different options. Here are some ways new investors can get started.
Apps for Investing
Several investment apps exist specifically for new investors. Companies such as Acorns, Robinhood and Betterment let new investors buy and sell small shares of stocks, bonds, and exchange-traded funds. Also, users can invest in individual retirement accounts (IRAs) through some of these apps. Several of the apps teach new investors on how to build a financial portfolio. Most of these apps only charge a small fee to start investing.
Index funds are an excellent choice for beginners who want to take a “hands-off” approach to investing. These funds track investment indexes such as the S&P 500, the Russell 2000 or the Dow Jones Industrial Average. Investors make money based on how well each of these indexes performs. Index funds are relatively cheap since they do not require professional management. When investors buy index funds, they are buying a portion of the index instead of an individual stock.
Technology now makes it possible to buy and sell stocks using algorithms in place of humans. Known as robo-advisors, companies offer new investors a chance to build a portfolio using artificial intelligence. Since there is less need to use professional analysts, these companies can charge much less than professional investment management companies. In many cases, robo-advisors only cost ¼ percent to ½ percent of a total account balance annually.
Also known as ETFs, these funds allow people to buy individual shares of an investment. However, the funds track indexes in the same way as index funds. The difference is index funds require investors to maintain a minimum balance while ETFs let people buy single shares. In some ways, ETFs are similar to purchasing individual stocks without the risk of losing money when one company performs poorly.
Beginners should also consider how much time they want to spend investing and how much money they are ready to commit. Investments of any kind have risk, so it is vital to learn the basics before diving in headfirst.