2020 was a rough year for many people financially speaking. At this point, vaccines and lowering infection rates are beginning to indicate that brighter days are ahead. This has left many wondering how to start investing again.
@mayofi
Investing is an empowering activity that can help you feel in control of your financial future. If you’re feeling the itch to invest, but you aren’t sure how to do so, you’re not alone. Fortunately, there are both traditional and creative ways to invest your money.
You don’t need to save a million dollars tomorrow. Instead, use the following tips to restart strategizing, saving, and investing your hard-earned cash in the months ahead.
1. Start by Sizing Up Your Situation
Before you put a dollar into any long-term investment, it’s important to take some time to size up your current financial situation. You may not want to do this if you know that things are bad. The truth is, though, good or bad, you need to know your current financial status if you’re going to invest moving forward.
Review Your Finances
Start your review by going over your current finances. This should start with your budget.
Go over your personal budget. Make sure it is updated and reflects any income or expense changes that have taken place over the last year.
If you’re an entrepreneur, also review your business budget so that everything is balanced and well-understood.
Set Investment Goals
Once you have a solid idea of how your income and expenses look, you can start to develop an investment strategy. This should include three critical steps:
- Figure out how much you can invest on a regular basis.
- Automate your investment savings by setting up automatic deposits into a dedicated account.
- Focus on diversification to help spread out the risk.
All three of these activities are essential. Budgeting a reasonable amount is how you can start investing, no matter how tight your finances are. Automating those investments can help you stay accountable with your investment goals. Diversifying them can also help you avoid building up too much risk as you go along.
2. Consider Real Estate
Once your finances have been set in order and you have a good idea of how much you can invest, it’s time to start sizing up your options. One of the most iconic investing ideas out there is to put your money in real estate.
However, the current housing market is wildly overinflated. Folks are engaging in bidding wars, paying for houses above the asking price, and using cash. Unless you have a clear strategy, you want to avoid the real estate market for the time being.
That said, there are a couple of ways that you can still tap into the housing market’s investment potential. For instance, you can save up and buy a house to live in. If you can put money down and avoid overpaying, this can help you start to build equity for the future.
You can also try wholesale real estate. This takes place when you contract with a seller and agree to sell their home for an agreed-upon price. If you find a buyer who will pay more, you pocket the difference. Wholesale real estate is a great way to get real estate experience without too much up-front capital.
If you have some money to work with, you can also try flipping a home. Look for a property that isn’t selling but isn’t too much work to fix up. With the right resources and skills, you can repair it, update it, and sell it in a timely manner. This can turn your investment into a decent chunk of change.
3. Invest in Stocks
Stocks are a great way to start investing your money. However, the stock market is at all-time highs right now, and investment should be done warily. Rather than taking major risks in the hopes of doubling your money in the next six months, look for minimalist investing opportunities.
For example, you can buy broad-market index funds that are very safe to work with. By opting for a broader fund like this, you can spread out the inherent risks that come with stock trading.
4. Review Traditional Options
It’s also worth looking into any retirement or investment options that you may not have utilized through your employer. For instance, if you have a 401(k) plan — especially one that matches contributions — you should start your investing there. Put in as much as you can to maximize matching contributions.
If you’re self-employed or don’t have an employer option, you can still use an IRA (individual retirement account) to invest on your own. While different in many ways, an IRA still provides a similar path toward a long-term retirement option. It is a great way to “set and forget” your investment. It can also be a safe way to avoid the temptation to cash out your investment along the way.
Regardless of the specific investment option that you choose, make sure to resist the temptation to make panic moves. Investing is a long-term game. It requires patience, focus, and a growth mindset. Treat initial investments as a learning opportunity. Find out what works and make note of the mistakes. Ask the right questions and keep up with industry developments or government policies that impact your investment. At the same time, avoid any unhealthy media consumption — such as social media — that can tempt you to make unwise emotional decisions.
Investing can be an overwhelming proposition. However, there are many ways that you can begin to get investing experience, even if you don’t have hundreds of thousands of dollars in your savings.
Start with your budget. From there, create an investing strategy. Make sure to diversify and choose from solid options like real estate, stocks, and retirement accounts. If you can begin to learn about investing in small doses now, you’ll be able to up your game as each year passes. And before you know it, you’ll have a serious chunk of change set aside as a safeguard against whatever the future may hold.