In previous articles, we learned how to invest money. In this article, we will see the top 6 investment opportunities for beginners to start with!

Introduction

For beginners, it’s generally advisable to start with relatively straightforward investments, lower in risk, and easier to understand.

Investing can be scary, but just like learning to ride a bike, anyone can do it with the right approach and information!

Here are some commonly recommended investments for beginners:

Investments for beginners

1. Savings Accounts and Certificate of Deposit (CD) or Fixed Deposit (FD):

a. Savings Accounts

You can keep your money in a savings account for maximum liquidity. You can withdraw it anytime you want plus you earn a small amount of interest too.

Think of it as a super-charged piggy bank. Put your allowance here and earn a little interest, like tiny rewards for keeping your money safe.

Bonus tip: Look for Zero Balance Accounts in banks that have good online services with no or minimum fees for young people.

b. Certificate of Deposit (CD) or Fixed Deposit (FD)

These are low-risk options that offer a fixed interest rate. While the returns may be lower than other investments, they provide safety for your principal.

You book fixed deposits for the duration that suits you. Lee’s say 6 months or 1 year. It will give you a fixed interest rate on that deposit. If you decide to break your fixed deposit before maturity, a small penalty will be deducted from the interest earned, and you can get all your principal and less interest compared to the promised one.

2. Stock Market Index Funds or ETFs:

Investing in broad market index funds or exchange-traded funds (ETFs) that track major stock market indices, like the S&P 500, provides instant diversification. These funds spread your investment across many different stocks, reducing the impact of poor performance from any individual stock.

There are multiple index funds industry-wise or top companies. Let’s say an index fund specific to the banking industry or an Index fund for the first 250 companies.

Imagine a basket of different apples representing various companies. An index fund is like buying that whole basket instead of just one apple. It diversifies your investment, spreading risk and making things less bumpy.

3. Mutual Funds:

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities.

These funds are managed by professional fund managers or management teams, who make investment decisions on behalf of the fund’s investors.

Various types of mutual funds, including those that focus on specific industries or sectors. Investors can buy those various funds and diversify their investments. This diversification helps reduce risk by minimizing the impact of poor performance from any individual investment.

4. Bond Funds:

Bond funds invest in a variety of bonds, offering a fixed income stream through periodic interest payments. They are generally considered less risky than individual bonds because the risk is spread across multiple issuers.

Government Bonds are considered the most secured bonds since there is a very low probability that a government will default.

Corporate bonds are considered to be risky as compared to government bonds. Corporations can go bankrupt and may default.

5. Real Estate Investment Trusts (REITs):

Investors, who are interested in the real estate sector can invest in REITs. REITs are the companies that own and manage income-generating real estate.

By investing in REITs you do not have to manage physical properties. The investment amount will be less than purchasing real land or property.

6. Educational Investments:

To invest in other asset classes you should have some extra money in your pocket.

If you are young and barely managing all your expenses with no or very little money left for investment, it is really hard to make wealth or a good portfolio by investing.

So Learning new skills or getting a good education is the best investment you can make in yourself! It opens doors to better jobs and higher earnings in the future.

Once you start saving more, you can invest this money in the above asset classes.

Conclusion

Beginners need to focus on building a diversified portfolio that aligns with their financial goals, risk tolerance, and time horizon. Additionally, educating yourself about basic investment principles and seeking advice from financial professionals can help you make informed decisions. Always be cautious of high-risk or complex investments, and consider starting with a small amount of money until you become more comfortable with the investment landscape.

Things to remember:

  • Start small and build your confidence gradually.
  • Do your research, even if it means asking adults for help.
  • Never invest money you can’t afford to lose.
  • Diversify your investments, like spreading your snacks between cookies and fruits.
  • Be patient! It takes time for investments to grow, just like a plant needs sunshine and water.

Investing can be fun and rewarding, even for beginners. Start with these, learn along the way, and watch your money grow like a magic beanstalk!