Leaving all your money in a savings account can help keep it safe but it will not grow much, explain asset protection experts at CS&P. Typically, banks offer very minimal interest rates for savings accounts. If you want to grow your money, you need to invest.
However, investing doesn’t guarantee that your money will grow significantly overnight. Investing is a long-term process that involves both opportunities and risks. It requires commitment, patience, and level-headedness especially with investments that depend on fluctuating markets.
Short-term vs. Long-term Investments
Investments can either be short-term or long-term. Generally, short-term investments are vehicles you expect to hold for less than 3 years such as certificates of deposit, money market funds, and short-term bonds. Day trading is a form of short-term investment in the stocks market. This is a speculative and highly risky investment tool that requires plenty of research.
Meanwhile, long-term investments offer a higher rate of return over a longer period of time, usually a 10-year period instead of just a few years. Some examples are index funds and stocks. Since you hold these investment vehicles for a long period, you worry less about cyclical market trends. Basically, long-term investments offer better returns for most people. They are desirable for long-term financial goals, such as college or retirement fund. However, if you want your money to earn in less than three years or for short-term goals, don’t put your money into long-term investment vehicles.
Tips to Start with Long-term Investments
The survey conducted by Gallup.com which showed that only half of Americans own stocks reflects the general sentiment of many people towards investments. Many Americans would rather keep their money in banks instead of investing them. Others think that long-term investments require a lot of money. But the truth is that you can begin with long-term investments with whatever extra amount you have in hand.
Financial analysts at IB Consult stressed that long-term investing is all about developing good financial habits. What you need is financial discipline to actually start investing. Below we take a look at some tips to help you start investing with whatever amount of money you have.
Develop the habit of saving
Long-term investments start with learning how to save money. But you don’t need to have thousands in savings to begin investing! You can begin with your disposable income. For example, you can begin saving $50 every month. That amount may seem minimal, but in a year it totals to $600.
Begin with a small amount and eventually increase it. Get yourself into living frugally. Spend only on essentials and avoid unnecessary expenses. These are necessary steps you’ll need to start long-term investing.
Know more about online investment platforms
Online investing is a great way to start your investment journey. There are a lot of online investments sites where you can learn the basics of investing. There are also financial tools that you can use to come up with informed financial decisions.
Some available investment platforms are virtual trading sites, online brokerages and investing sites. These online investment tools are easy to use. Even if you don’t have prior investment experience, you can easily set it up and start investing. However, you have to be cautious when using these online sites and make sure you choose a reputable site.
Consider enrolling in your company’s retirement plan
Enrolling in a 401(k) or a company-sponsored retirement savings plan is another long-term investment vehicle you can start with. You can spare a small percentage of your earnings for the retirement plan. This is a good starting point especially if you are bad at saving. With this long-term investment, you are unlikely to miss out on the monthly contribution, at the same time you won’t notice the very minimal amount and you won’t be able to access the funds until its maturity date.
There are lots of ways to begin long-term investments even with a minimal budget. Hopefully, these three tips discussed above can help you with that first step. As with any journey, you have to start somewhere. Once you’ve developed the habit of investing, the rest will follow. Soon, you’ll realize you’re actually beginning to diversify on other investment opportunities.