Investment Guide for Beginners: How to Start Building Wealth in 2024

Investing can seem daunting for beginners, but with the right guidance, anyone can start building wealth in 2024. This comprehensive investment guide for beginners will walk you through the essentials, offering actionable advice to set you on the path to financial success.

Why Start Investing Now?

Looking back, we always have regrets and things that, we would’ve done better if we knew. Investing shouldn’t be another one of those things we look back at and regret not starting earlier. The earlier you start, the better off you will be, allowing certain investments to mature. Investing for beginners has never been easier.

The Benefits of Early Investment

• Compounding Growth: Albert Einstein said that “compound interest is the 8th wonder of the world. With modern-day everyone wanting everything now, this is how to beat the hare being the tortoise. It may not be ideal now, but you will be glad you kept your discipline!
• Financial Security: If an emergency comes up you will be able to take care of yourself. Stressing if, you have enough money is a great feeling, we weren’t born just to work and pay bills.
• Retirement Planning: There are people in this world that work past the retirement age. Starting early allows you to plan for the future and make sure you can retire when you want, not when the government decides.

Here’s a quick example of compound interest:

• Start: You have $1,000 in a savings account with a 5% interest rate and a 12-month compounding period.
• After one year: You earn $50 in interest ($1,000 x 0.05 = $50).
• After two years: You earn $52.50 in interest ($1,050 x 0.05 = $52.50).
• And so on: The interest is added to the principal balance each year

This is without having invested more than the original $1,000, so adding more into the savings monthly would help this grow a lot faster. Let’s get into Investing for beginners!

Getting Started: A Step-by-Step Investment Guide for Newbies

The great thing about Investing for beginners, is that it’s still very possible and can improve your life if you stick to it and maintain your discipline. There are ways you can self-educate or have someone teach you about Investing. By following this guide you will get a basic understanding of Investing and what ways you’d like to get into.

Understand the Basics before Investing

Before diving into Investing for beginners, a few things to take into consideration are your risk tolerance (how much you can lose), where you will keep your money, and how to spread out your investments.

• Risk Tolerance: Everyone has a different risk tolerance depending on their current finances. You should assess your finances and see how much you can lose before it’s a problem. You should Invest, but if your finances don’t allow, start saving a cushion first.
• Money Placement: You should not have your money in cash, you should keep a balance between stocks, bonds, and cash based on your goals. After assessing your risk tolerance, you will understand where you should put your money spreading it evenly.
• Choose Variety: When Investing in any area, you should Invest in more than one area so you don’t get tied up with a one-way income.

Budgeting for Your Investment Journey

As we mentioned above making sure your finances are in order before Investing, and assessing your risk tolerance can help ease losses.

Create a Budget That Includes Investing

Before starting to Invest there should be a budget that includes investing in it, as opposed to using leftover funds which won’t help hold you accountable. Set aside a specific percentage of your income for investments consistently and watch your portfolio grow. A commonly used approach is the 50/30/20 rule, where 20% is allocated to savings and investments. If this doesn’t work with your finances, adjust as needed, but don’t remove it completely.

Build an Emergency Fund

You always want to be sure you can handle an emergency when it arises, saving for these emergencies can be beneficial. The peace of mind is unmatched and allows you to cover losses if your investments lose gains.

Set Your Financial Goals

As mentioned in the last section we suggest having a safety net of about 3-6 months of your bills to cover yourself. Over time you should keep growing your savings, also make sure it’s in a savings account that earns a decent interest yearly.

What are your plans and reasons for looking to enter the Investing world? Are you saving for retirement, a house, or simply to grow your wealth? This will help you distinguish which option is better for you depending on available funds, long and short-term goals, as well as ROI (Return on Investment)

• Short-Term Goals: These can be things like getting a new car or going on vacation, something that isn’t too far away.
• Long-Term Goals: Planning for Retirement, buying a house, or buying bigger real estate developments. These would be things that you have to plan deeper for and take the first step.

Mastering the Basics: The Beginner’s Investment Toolbox

Understanding basic concepts is the first step on your investment journey. Here are some to get you started, whichever seems the most appealing to you, we recommend diving deeper into the subject to become familiar.

Types of Investments to Consider

• Stocks: Owning a part of a company which can bring you back a high yield when properly done.
• Bonds: These are loans given to the Government or perhaps a Business that will bring in lower yields.
• Mutual Funds and ETFs: Multiple investors come together and combine their money and spread out their investments togehter.
• Real Estate: Two ways to get into Real Estate include Physical property or REITs (Real Estate Investment Trusts).

Stocks: Ownership in a Company

Stocks represent shares of ownership in a company. The company sells the stocks, and the buyer gains a percentage of the company, becoming a shareholder. By buying stocks, you become a shareholder and may benefit from the company’s growth.

• Growth Stocks: Growth Stocks are companies that are expected to do better than others in the market, such as tech firms.
• Dividend Stocks: These types of Stocks provide consistent income paying in a variety of ways depending on the compan’s policy on payments to shareholders.
• Blue-Chip Stocks: When a company performs well consistently it will be considered a Blue-Chip Stock (e.g., Apple, Coca-Cola).

Bonds: Low-Risk Income

Giving a Business or the Government a loan and getting the interest paid over time, and the remainder at a set time is called a Bond. Interest made through this option should be reinvested into Bonds so you can grow the ROI (Return on Investment) on your initial investment.

• Government Bonds: These Bonds are given by the Government, and are usually the safest option in Bonds, but offer a lower return.
• Corporate Bonds: With more Risk being involved, Corporate Bonds are given by companies and have a higher return than Government Bonds.
• Municipal Bonds: With tax benefits included, these are offered by Local Governments for running day-to-day, and at times for building projects. These Bonds are perfect if you’re looking to offset some taxes for a period of time.

Mutual Funds and ETFs: Diversified Portfolios

Mutual funds and exchange-traded funds (ETFs) are gathering funds from different investors, and putting them together to put into a variety of streams which could consist of stocks, bonds, or other assets.

• Index Funds: With a lower cost, this option offers tracking of the major indexes like the S&P 500, offering a wide market exposure with little funds to start.
• Actively Managed Funds: These Funds are managed consistently by a manager who will try to outsmart the market. With the manager, you will have a higher fee to run your accounts.
• Sector Funds: Focusing on specific industries, such as technology or healthcare, is considered Sector Funds. Soley focusing and mastering one area can prove beneficial!

Real Estate: Tangible Assets

Real Estate has tested the test of time and has proven to provide both depreciation and a steady income. There are many ways you can get started in Real Estate and many creative ways to start off.

• Rental Properties: This option includes buying/having a home, finding a tenant (someone who rents from you), and collecting monthly payments. Rental Properties can build weath for a lifetime!
• Real Estate Investment Trusts (REITs): REITs are like stocks in how they are traded. REITs don’t require you to own the property outright, and require lower starting funds. These companies manage the property, which lowers what’s asked of you.
• Real Estate Crowdfunding: A newer option allowing smaller investments in large real estate projects.

For a more in-depth guide on Real Estate check out our article “Ways to Make Money Investing in Real Estate in 2024.”

Alternative Investments: Diversifying Beyond Traditional Assets

Commodities: Tangible Goods

Investing in commodities involves buying precious metals (described below), or related securities.

• Gold and Silver: These can be bought online or in person and have shown to be very consistent over long periods. Good for Investing for beginners that want to have lower risk, and own something that you can physically touch.
• Oil and Gas: Can be riskier than Gold and Silver, but can have higher returns as they are connected to the lucrative energy market.
• Agricultural Products: Includes wheat, corn, and livestock, influenced by how much they are used around the world.

Cryptocurrencies: Digital Assets

Cryptocurrencies have become popular in the finance world such as Bitcoin and Ethereum, which are digital currencies that operate on blockchain technology.

• Pros: High potential returns and innovative technology.
• Cons: Very unpredictable and can fluctuate. Not ideal if you’re looking for a consistent stable increase in income.

Alternative Investments: Diversifying Beyond Normal Assets

Savings Accounts and CDs: Low-Risk Options

For starting investing for beginners who want safe investments they can trust and rely on, traditional savings accounts and certificates of deposit (CDs) will get the job done and get you a return that can be expected, unlike some on this list.

• High-Yield Savings Accounts: When looking for a savings account, make sure to compare Interest rates to see who offers you the most for your money.
• Certificates of Deposit (CDs): These will give you a set return at a set time, and a penalty for taking it out early. This could be a good option to start learning how to control your emotions in Investing your money.

Choosing the Right Investment Platform

With all the technology we have around us we should be smart to use it. There are digital platforms that can help you with smaller investments. These platforms usually offer educational resources, including helping you automate your savings.

Popular platforms include:

• Robo-advisors like Betterment
• Brokerage accounts like Vanguard will help especially if you’re looking into ETFs (Exchange-traded Funds)
• Smaller investing apps like Acorns help you automate your savings.

Start Small and stay on Top of it!

We know this can seem scary, but there is nothing scarier than standing still and expecting the world to bring you results. We have to go and get our dreams, sometimes it won’t be easy, and we may have to sacrifice things we love now for a better tomorrow! Staying consistent will be your best friend in Investing as it is not about the race it’s about the marathon and the climb. We hope you enjoyed our guide Investing for beginners, and below please let us know if this was helpful!

Common Mistakes Beginner Investors Should Avoid

Learning from common mistakes can save you time and money.

Timing the Market

We as humans can’t predict the future, so don’t try to predict the market, stick to the consistent proven true facts at the beginning. When gaining experience, you will be able to increase your risk in the market.

Ignoring Fees

Having a high fee will lower the ROI (Return on Investment), try to keep fees to the lowest you can to get as much profit as you’re able to.

Additional Tips for Beginner Investors

• Educate Yourself Continuously: Read books, listen to podcasts, and follow trusted finance blogs like Financial Success Today.
• Monitor but Don’t Micromanage: Regularly check your portfolio, but avoid reacting to every market change.

Investment Guide for Beginners FAQs

What is the best investment for beginners?

Index funds and ETFs are excellent starting points due to their low fees and diversified nature.

How much money do I need to start investing?

You can begin with as little as $5 using smaller investing platforms.

Can beginners invest without prior knowledge?

Yes, tools like robo-advisors and beginner-friendly platforms simplify the process.