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What You Need to Know Before Using Common Investment Strategies

Money management is something we all need to master, and most people have a handle on the basics. We budget, we set bills up on autopay, and we sock away what we can in a savings account. But financial experts will tell you there are better options than a savings account.

Having an emergency savings account is important, but if you already have 3-6 months of income saved and no debt to pay off it’s a good time to start investing. Even if you just have $1,000 to invest that’s enough to get going.

If you have no experience investing whatsoever, that shouldn’t stop you from leveraging your money. There are people and tools that can be used to help you make more informed decisions so that you grow your wealth over time. When it comes to investing, it literally pays to use all the tools at your disposal.

Below is an overview of what you need to know about three common investment vehicles along with information on resources that can help you maximize your investment:

Stocks

Stocks are one of the most common ways to invest these days. When you invest in stocks you are buying shares in a corporation. If the corporation grows and increases its earnings the value of its stock increases.

Stocks are considered a somewhat high-risk investment, but you can lower the risk by investing in exchange-traded funds (EFTs). An EFT is a bundle of stocks. The diversification helps to mitigate the risk.

There’s so much information about stocks and an endless array of options that it’s easy to feel overwhelmed. One thing you’ll want to pay attention to is earnings. Companies release earnings information on a regular basis, which can help you determine if it’s a right time to buy a company’s stock. Tools like an up-to-date earnings calendar make it much easier to dig through this information and make sense of it.

While you can purchase and manage stocks yourself using online tools, you may want to consider enlisting the help of a stockbroker. This financial expert specializes in stock purchases with the goal of helping their clients get the biggest return.

You should know that by and large, stocks are a long-term investment strategy. There are instances when people buy at the right time and something out of the norm pushing the stock through the roof quickly, but that is rare.

Real Estate

Although most people buy a home for personal rather than investment purposes, the fact remains a house is the largest investment most people will ever make. Purchasing a home of your own is a great way to start investing.

In terms of finding real estate that’s a good investment, location is one of the biggest factors for a few reasons. While real estate investments in Princeton New Jersey might be strong, it might not be the case everywhere. If you live in a seller’s market with homes that are already renovated, listed at maximum value and there are few multi-family homes and foreclosures, there’s not much opportunity for short-term gains. Cities like Princeton where there is a major university are also advantageous because there is a good market for renters.

You can still make money over the long-term through appreciation, but don’t expect much cash flow right away in the markets described above.

Two other location considerations are property taxes and insurance. Even if you purchase an investment property with cash, insurance and taxes will still be a monthly expense that cuts into operating expenses and cash flow.

The resource you want to have with this investment vehicle is a really good realtor. Find someone who specializes in real estate investment properties and knows how to determine which ones will bring in a return through cash flow and appreciation. An experienced realtor should also have great contacts for handymen and contractors if you plan to flip homes and property managers if you want to invest in rentals but don’t want to fool around with the management.

Precious Metals

Gold and silver are some of the oldest investment vehicles in the world. For centuries people have stocked up on precious metals as a way to secure their financial future. Why? Mostly because it’s a tangible asset that is universal.

However, prices on precious metals can be very volatile. They are also affected by global events that happen far from your location.

There are two primary ways to invest in precious metals. With bullion bars or coins that you physically own or through an EFT. In this case, bullion might be the safest option since you have control over the asset. You’ll want to make sure that you get a certification proving the metal is real and only purchase precious metals from reputable sources in stable nations like those in North America and the U.K.

 

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Susan Paige

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