How To Get Started — Top Tips On Investing For Beginners
In this quick lesson, I discuss important Keys to Learn How to Start Investing Safely Without Stress and Too Much Time Commitment.
Take a look at the video before you move on to the transcription below. Or check out my article about what day trading is and why it is not investing to get a better idea of what I’m talking about.
Here’s the situation — for every $1000 you put in the bank you earn at MOST $1 per year. Yet the bank is taking your same cash and earning at least $30 on it. And doing it legally. (Actually, that is being conservative on the bank’s part they are usually raking in around $100 per each $1000.)
So I’m going to show you a way you can start earning at least 30 times more of what you would if you have your cash in the bank — safely. There are no crazy schemes or hacks. I am just talking about building an investment portfolio.
And if you’ve already been investing by either having a portfolio that you don’t know what to do to make it grow or have lost a bundle due to risky investments, these easy-to-follow steps will help you build that portfolio up. By investing smartly and safely.
First, I’m going to cover the three major categories of fixed income investing. These three are, in my opinion, the safest possible way to grow your portfolio. And if you want to stay super conservative, putting the majority of your money into fixed income is a safe way to grow your portfolio yearly.
Government Bonds
Pretty much all over the world, governments need money to make progress for whatever it is that they want to do. They could either have a building project that they’re working on roads. What they do is that they put out bonds for people, for investors to lend them money.
Anyone can buy the bonds from the government, after the due date, they will give you your money back plus interest. Now, if this sounds too good to be true. Think of it this way. The governments, if you (the people) don’t lend them the money, the governments have to go to the bank. Banks always charge way more in interest, so they prefer to put it out to the public.
It’s a win-win situation. You earn interest and the government has money to put into whatever project that they’re working on. It’s a fantastic way to invest and know that you’ll get all your money back. Plus the interest, what the government promised. But the best part about government bonds is they’re tax-exempt (at least in the US), meaning that whatever gains you get, you don’t have to pay any taxes on it, which is pretty amazing because usually for other investment opportunities, you do have to pay taxes on your gains.
Fixed Income Investing in Municipal Bonds
This happens for instance when a department of a state or a county or even a State, also has a project that they are working on and they need money.
These are usually smaller than Government bonds. So you need to have less money to invest in them, but at the same time, the interests that they pay are usually higher.
What’s great about municipal bonds is that the majority of them are also tax-exempt.
Corporation Bonds
All corporations need money. At some point, they all need to borrow money. So instead of going to the bank and getting super-high interest rates, they come to us investors.
And the great thing about corporations is that they offer a much higher interest in return for when the due date is you get all your money back and interest.
Also, chances are that large corporations such as Apple or IBM, or McDonald’s is not going bankrupt in the year (for example) that you’re going to lend them the money for. So it’s a safe bet. And yet it could still be construed a little bit as less conservative simply because the reward is much higher and the risk is a little bit higher. But chances are it’s still relatively safe.
Things to Understand About Investing in Bonds
1. Time — Usually, for bonds, you can’t do less than one year. You could do anywhere from one year up to 30 years. I would not recommend 30 years but a year is a good time, not much is going to happen in a year and that works as a guarantee that you will get your money and interest back.
Five years is a little riskier, and you won’t be able to access your money for a long time but you can get a little more money, but it isn’t that much.
What I would do is to invest for 1 year and by the end of it, if things still look solid, I reinvest yearly. Just to keep it on the safe side.
2. How much to invest — Usually with government or municipality bonds, they require $1000 or more. When it comes to corporation bonds, it varies, but it is usually $5000 or more. So if you have a lot of money and you want to find your own.
Diversifying Safely and Smartly
You can do this with exchange traded funds or otherwise known as ETF ETFs. And this is my favorite way to go and this is the only way I invest these days.
There are so many different ETF out there for all categories and you can buy them on the same day on the stock market like you would buy a stock and sell it either tomorrow or in a year, 10 years. It’s up to you.
If you sell it for less time than bonds, what happens is that the interest rate gets pro-rated and added to your account. Also, there is no limit. You could buy one share or you could buy a thousand shares. It’s completely up to you.
If you want to learn more about the other types of funds, please contact me and we can talk about it. I want to hear from you. What steps are you going to take to start building your portfolio? What fixed incomes are you most interested in? I’d love to hear from you.
You could either write me a comment below or you can contact me directly. I’d love to hear from you. And if you have any questions, please let me know.
If you want to learn more about my journey and how I started day trading you can read it here or you can watch on my YouTube channel.
If you want to start day trading with ease and confidence — Sign up for the FREE How to Day Trade Mini Course.
So if you have any questions you can always ask me at traderchick.com and if you want to start day trading basics — check out Day Trading Courses.