Money Investment Options for Beginner

Investing is one of the premier ways to grow money over time. While the stock market attracts the most attention for those looking to build wealth, there are plenty of other investments to pick from, such as bonds, mutual funds and certificates of deposit.As a beginner, though, it can be hard to know where and how to get into investing. In the end, a determination of your long-term financial goals, like retirement, will dictate what types of investing strategies are best for you. It can also be helpful to enlist the help of a financial advisor to help you make smart investing decisions based on your specific needs.Investing even very small amounts can reap big rewards. You don’t need to be the Wolf of Wall Street to start investing. It’s okay if you’re more of a mouse of Main Street. Even if you only have a few dollars to spare, your money will grow with compound interest.The key to building wealth is developing good habits—like regularly putting money away every month. Swap out the barista-made cappuccinos for coffee at home and you could already be saving more than $50 a month. Once you have a little money to play with, you can start to invest.Recently, with a robo-advisor or savings account, you can make your money work while you play. With a stock trading app, you can play with a little money and learn valuable investing lessons at the same time. Just like Halloween costumes, investing comes in many different forms. It shouldn’t be a scary word. With so many different options, investing for beginners is simpler and more straightforward than ever before.An investment is a long way from putting your cash in a bank account where it sits to earn interest. An investment is a gamble: instead of the security of guaranteed returns, you're taking a risk with your money. The hope is that you make a lot more than you put in (a juicy profit), but there's the possibility you end up with less (a nasty loss).You can invest in almost anything, from the most mainstream popular targets...Shares, Funds, Bonds, Government bonds (gilts), Property market... to the rather more exotic, such as...Farmland, Wine, Vintage cars, Art, eg, paintings, sculptures, Fledgling technology firmsMaybe You have this image in your heads of investors as looking either like the dude from the Monopoly game or like Gordon Gekko from Wall Street.Once upon a time, that may have been true. After all, already-affluent men were the ones with the spare cash and the time to devote to the stock market.However, this is no longer the case. Thanks to the internet, investing has become democratized, and you can get started with only a few dollars. Anyone, regardless of gender, age, or income, can start investing today.By far, the least risky way (and probably the worst way) to invest your money is to put it in a savings account and allow it to collect interest.However, as is usually the case, low risk means low returns. The risk when putting your money into a savings account is negligible, and typically, there are little to no returns.Still, savings accounts play a role in investing as they allow you to stockpile a risk-free sum of cash that you can use to purchase other investments or use in emergencies so you don’t touch your other investments.When purchase a bond, you are essentially loaning money to either a company or the government (for US investors, this is typically the US government, though you can buy foreign bonds as well).The government or company selling you the bond will then pay you interest on the “loan” over the duration of the bond’s lifecycle.Bonds are typically considered low risky than stocks, however, their potential for returns is much lower as well.If you have a 401(k) or another retirement plan at work, it’s the first place you should put your money, especially if your company matches a portion of your contributions. That match is free money and a guaranteed return on your investment.You can contribute up to $20,000 to a 401(k) in 2019 (or $25,000 if you’re 50 or older), but that doesn’t mean you have to contribute that much.You can start with as little as 1% of each paycheck, though it’s a good idea to aim for contributing at least as much as your employer match. For example, a common matching arrangement is 50% of the first 6% of your salary you contribute. To capture the full match in that scenario, you would have to contribute 6% of your salary each year. But you can work your way up to that over time.When you choose to contribute to a 401(k), the money will go directly from paycheck into the account without ever making it to your bank. 401(k) contributions are made pretax. Some 401(k)s today will place your funds by default in a target-date fund, but you may have other choices.ETFs operate in many of the same ways as index funds: This money investment typically track a market index and take a passive approach to investing. They also tend to have lower fees than mutual funds. Just like an index fund, you can buy an ETF that tracks a market index like the S&P 500.The main difference between ETFs and index funds is that rather than carrying a minimum investment, ETFs are traded throughout the day and investors buy them for a share price, which like a stock price, can fluctuate. That share price is essentially the ETF’s investment minimum, and depending on the fund, it can range from under $100 to $300 or more.ETFs are traded like a stock, so brokers often charge a commission to buy or sell them. But many brokers have a selection of commission-free ETFs. If you plan to regularly invest in an ETF — as many investors do, by making automatic investments each month or week — you should choose a commission-free ETF so you aren’t paying a commission each time. (Here’s some background about commissions and other investment fees.)The most common and most beneficial option for an investor to put money is the stock market.When you buy a stock, you will own a small portion of the company you bought into.When the company profits, they may pay you a portion of those profits in dividends based on how many shares of stock you own. When the value of the company grows over time, so do the price of the shares you own, meaning that you can sell them at a later date for a profit.You know you’re supposed to invest, you’ve managed to scrape together a little bit of money to do so, but you would really rather wash your hands of the whole situation.You largely can, thanks to robo-advisors. These services manage your investments for you using computer algorithms. Due to low overhead, they charge low fees relative to human investment managers — a robo-advisor typically costs 0.25% to 0.50% of your account balance per year, and many allow you to open an account with no minimum.They’re a great way for beginners to investing because they often require less money and they do most of the work for you. That’s not to say you shouldn’t keep eyes on your account, this is your money; you never want to be completely hands-off , but a robo-advisor will do the heavy lifting.And if you’re interested in learning how to invest, but you need a little help getting up to speed, robo-advisors can help there, too. It’s useful to see how the service constructs a portfolio and what investments are used. Some services also offer educational content and tools, and a few even allow you to customize your portfolio to a degree if you wish to experiment a bit in the future.Index funds are like mutual funds on autopilot: Rather than employing a professional manager to maintain the fund’s portfolio of investments, index funds track a market index.A market index is a selection of investments that represent a portion of the market. For example, the S&P 500 is a market index that holds the stocks of roughly 500 of the largest companies in the U.S. An S&P 500 index fund would aim to mirror the performance of the S&P 500, buying the stocks in that index.Because index funds take a passive approach to investing by tracking a market index rather than using professional portfolio management, they tend to carry lower expense ratios — a fee charged based on the amount you have invested — than mutual funds. But like mutual funds, investors in index funds are buying a chunk of the market in one transaction.These are kind of like the robo-advisor of yore, though they’re still widely used and incredibly popular, especially in employer retirement plans. Target-date mutual funds are retirement investments that automatically invest with your estimated retirement year in mind.Let’s back up a little and explain what a mutual fund is: essentially, a plate of investments. Investors buy a share in the fund and in doing so, they invest in all of the fund’s holdings with one transaction.A professional manager typically chooses how the fund is invested, but there will be some kind of general theme:A target-date mutual fund often holds a mix of stocks and bonds. If you plan to retire in 25 years, you could choose a target-date fund with 2045 in the name. That fund will initially hold mostly stocks since your retirement date is far away, and stock returns tend to be higher over the long term.Over time, it will slowly shift some of your money toward bonds, following the general guideline that you want to take a bit less risk as you approach retirement.One is Acorns, which rounds up your purchases on linked debit or credit cards and invests the change in a diversified portfolio of ETFs. On that end, it works like a robo-advisor, managing that portfolio for you. There is no minimum to open an Acorns account, and the service will start investing for you once you’ve accumulated at least $5 in round-ups. You can also make lump-sum deposits.Acorns charges $1 a month for a standard investment account and $2 a month for an individual retirement account. Our unsolicited advice: Max out that IRA account before you start using the standard investment account — there are tax perks to the IRA that you don’t want to miss. (Learn more about IRAs here.)Another app option is Stash, which helps teach beginner investors how to build their own portfolios out of ETFs and individual stocks. Stash carries just a $5 account minimum and has a similar fee structure to Acorns, though balances that top $5,000 are charged 0.25% of that balance per year, rather than the flat fee.Rather than buying a single stock, mutual funds enable you to buy a basket of stocks in one purchase. The stocks in a mutual fund are typically chosen and managed by a mutual fund manager.These mutual fund managers charge a percentage based fee when you invest in their mutual fund.Most of the time, this fee makes it difficult for investors to beat the market when they invest in mutual funds. Also, most mutual fund investors don’t actually ever beat the stock market.If you’ve got plenty of money in your cash savings account, enough to cover you for at least six months, and you want to see your money grow over the long term, then you should consider investing some of it. The right savings or investments for you’ll depend on how happy you’re taking risks and on your current finances and future goals.It doesn't matter if you're about to buy your first share or pick a stock market fund for the first time, always ask yourself why you're looking to invest.Over the long run, historically stocks and shares have outperformed money in savings accounts.That's no guarantee they'll do so in future. It's all about your personal circumstances. For example, you might be one of the many who have despaired at the rotten rates on offer in savings accounts and are prepared to take a risk in the hunt for bigger returns.You may have drawn up a well-researched plan to save $10,000 over the next decade to help pay for your children's school fees. In both these cases, it's a clear green light to go and invest.