When Should I Start Investing?
October 27, 2020
By Rahul Iyer
You should start investing as soon as possible. Many will say you should invest right now no matter your financial position, but we try to be as practical as possible here. There are a few boxes that you must check off before you begin investing. Two of the most critical things that must be done before investing are clearing all your high-interest debt and establishing an emergency fund.
If you have already cleared all your high-interest debt and have at least three months of your living expenses stored up, you should begin investing right away. This applies to any age group. You could start investing as early as 12. It is also important to note one is never too old to invest.
What is Investing?
The process of buying an asset that is projected to increase in value over time is referred to as Investing. An investment is not limited to buying and selling stocks on the stock market. You could purchase a baseball card, an antique car, or something else that will grow in value and bring returns when you decide to sell.
When it comes to investing, the most prominent practice is buying and selling securities. This includes such things as stocks, bonds, and mutual funds. Money is made when the securities held grow in value over time and are sold for a price higher than it was purchased for.
Where to Start?
Once upon a time, investing was a very technical thing. These days, investing is a simple task. You can use online brokers, convenient investment mobile phone apps, or a 401(k) plan. This makes investment accessible to all.
While investing in the stock market is simple these days, this does not remove each investor’s obligation to get educated on the principles of investing. To be a successful investor, you must gain an understanding of the different securities available. Below are the most common forms of investments.
Stocks: Stocks represent ownership in a company or group of companies. These are usually secured on the public market. Investors are permitted to buy several shares of stock in a company. As the value of each share increases the value of your ownership in the company increases. Of course, there is also the chance of it reducing in value.
It can take some time to benefit from this investment option, but there are cases when sudden changes in a company’s standing can cause significant gains. You do not always need a lot of money to buy stocks. These days you can even buy a fraction of a company’s share.
Bonds: Bonds include lending money to a government entity or a company. In return, they pay you interest on the money that you loaned them through your bond investment. These securities are usually issued for a specified period. At the end of this period or at its maturity date, you will get back your investment as well plus the interest that accrued over time.
This investment option usually offers lower rates of return. Nonetheless, bonds are far less volatile than other securities.
Index and Mutual Funds: Index and mutual funds pool money from different investors and then invest the funds in different investment vehicles. Index funds are tied to prominent indexes such as the S&P 500. This means that the stocks that constitute the index fund are very similar to those that make up such indexes as the S&P 500.
Index funds are advantageous because they allow investors to diversify their investments without having to go through the hassle of buying and managing individual securities.
We encourage you to begin investing as soon as you can. So long as you have cleared the criteria established earlier in this article, you should begin the process of investing your money. It does not matter how much money you have available. All that matters is that you get started.