The adage goes something like 'the best time to
start investing is now.' For some beginners, this can be painstaking,
considering the volumes of information on the best investment with guaranteed
returns. Other beginners will think this is an easy way to make a quick buck
and plunge headfirst in the markets.
This post is for the amateur investor who is ready
to make a strategic decision to safeguard their investment against exposure to
unsustainable risk, but with enough latitude to pursue conservative
opportunities that yield capital gains and learn the ropes of the trade while
at it.
Apart from the theoretical understanding of how the
financial markets operate, it is imperative that a beginner gets a realistic
feel of the different strategies’ investors employ in pursuit of opportunities
in the markets.
The following is a detailed explanation of five
best investment approaches suitable for beginners:
1. ETFs
Exchange-traded funds (ETFs) offer a
less rigorous opportunity for participating in the stock exchange. As a
beginner, investing in ETF is ideal because ETF pools together several
assets including particular stocks, commodities, and bonds, and the performance
tracked against an index. ETFs allow you as the investor to trade several
assets commonly as if they were a single stock. The diversification of the ETF
enables beginners to access a broad portfolio of stocks and bonds providing convenience and reduced risk. Consequently, the flexible nature of ETFs allows
an investor to trade flexibly, with the choice of buying and selling at any
time during regular trading hours.
2. Mutual funds
Mutual funds are pooled investment
vehicles ideal for beginners because of their two primary characteristics. First,
a beginner can access the services of a professional trader in the name of the fund
manager despite the meek amount of capital, some as low as $25. Secondly, the investor is exposed to minimal risk because mutual funds, like ETFs, invest in
a diverse asset class portfolio of stocks, commodities, and bonds across
different markets and industries.
3. Individual stock
After a detailed analysis of the past
performance of an individual stock and the prevailing facts, individual stocks
can offer a stable investment opportunity suitable for beginners. Caution
should, however, be placed to ensure that the investment into the stock does
not upset the risk tolerance level of your portfolio in case of a negative turn
of events. Markets is not always predictable.
4. Certificate of deposit
Depositing money in a bank over a
specified term length with a fixed and guaranteed return of capital plus
interest is a sound investment opportunity for a beginner. Certificate of
deposits is insured and hence the capital plus interest is guaranteed to the
investor at maturity. However, it is important to understand that access to
this money is limited during the stipulated investment term length and may
attract fees or loss of interest in case of withdrawal.
5. High Yield Savings Account
This investment also entails saving
for the sole purposes of earning capital gains from interest over a specified
term length. However, unlike the certificate of deposit, the interest is not
fixed and hence interest is according to the prevailing market rates. Funds in
this account are however more liquid hence easily accessible.
Chris Bouchard is a strategic consultant who works
with non-profit leaders and social entrepreneurs to apply concepts and
techniques to identify complex strategic issues, find practical solutions, and
devise strategies to create and win a unique strategic position. He also offers
project development, proposal writing, and project evaluation services.
Article Source: Chris Bouchard
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