Investing for beginners

Investing 101: Where to Start as a Beginner Investor

Where to Start as a Beginner Investor

So you’ve managed to put aside extra money and have grown your savings to a decent sum.

Now you are wondering how to turn those savings into a nest egg. Great idea!

Investing is one of the best decisions you can ever make, because it allows you to grow your

wealth, and counter the effects of inflation. But the question is, where do you begin?

After all, there are plenty of options available for you as a beginner investor, and that may be confusing.

Pair that with all the complex terms and jargon, and you may give up even before starting.

And here comes the big question..

What Should I Invest In?

When it comes to investing, there are a variety of options, so let us show you the most common ones, which would best suit you.

Buying Productive Assets

By definition, a productive asset accumulates value over time.

Note that not any type of asset will count as an investment. For instance, most cars will not add value over time.

If anything it may even be considered a liability.

However, investing in a building is a good example of a productive asset. You will still own the building many years from now, and you will keep receiving rental income thirty or forty years in the future.

Real estate

Recall what we said about productive assets, investing in real estate is something similar.

Many who choose to go this route can opt for any one of the following:

● They can choose to buy a property and rent it out

● The investor can buy a property and resell it at a higher price

● The investor can buy property at a low price, improve the property and resell it at a higher price (i.e house flipping).

Buying Stocks

When many of us hear about investing in stocks, we automatically think about trading in shares. While trading is a high-risk investment option, it does offer the opportunity for huge rewards.

Alternatively, if you are the type of person who is a bit more cautious, then you may choose to buy the shares of a company. Here you will get partial ownership of the company which makes you entitled to a share of the profits and losses.

Investing in shares is considered one of the most rewarding options for those looking to grow their wealth over time.

Investing In Bonds

You can consider bonds as a loan that you give to the bond issuer in return for receiving interest and eventually getting your principal amount back.

One benefit of bonds is that they can be traded the same way as stocks. In other words, you do not have to wait for the maturity date.

If bonds spark your interest, there are several options you may want to consider:

● US treasury bonds – these are issued by the federal government. They are considered the safest in terms of credit and default risk. This is because many investors will assume that the federal government cannot fail to pay.

● Corporate bonds - the credit risk and default risk will depend on the creditworthiness and business soundness of the company issuing the bond. They are considered high risk.

● Tax-free municipal bonds – these are issued by local governments, towns, and municipalities. As the name suggests, they are exempt from income tax and sometimes from local and state taxes.

Conclusion

Before you decide where to invest, consider what you are most passionate about. This makes the whole investment journey all the more fun. Secondly, it is always prudent to have a mentor!

Check out the rest of our Intro to Investing Series:

https://gocanadianmortgage.com/investing-in-stocks/

https://gocanadianmortgage.com/investing-in-bonds/

https://gocanadianmortgage.com/finance-tips/

https://gocanadianmortgage.com/investing-for-beginners/