• Alex Oger, at Digital Silk


• 29.03.2024 02:30 pm
undisclosed

Have you ever wondered how to make your money work for you? 

You get to sit on a beach, sipping a cool drink, while your investments are growing steadily in the background. 

Sounds like a dream, right? 

Well, it doesn't have to be just a dream. 

With the right knowledge and a bit of effort, you can turn it into a reality. 

In this article, we'll show you how to start investing in 2024, from the basics of investing to choosing the right investment options for your financial goals. 

So, grab a seat, and let's dive in!

1. Start Investing as Early as Possible

The first rule of investing for beginners is to start early – because time is your secret weapon.

See, when you invest, your money earns interest. 

And that interest? It also earns interest.

The earlier you start, the more time your money has to compound and grow. 

There’s also the fact that investing requires a long-term perspective. 

The stock market goes through ups and downs, and it can be volatile in the short term. However, over the long haul, the stock market has historically trended upward. 

Trying to time the market by buying and selling based on short-term fluctuations is often a losing strategy.

On the other hand, when you invest with a long-term perspective, you can ride out these market's ups and downs because you have time on your side.

2. Decide How Much to Invest

Fired up about investing? 

Good. Now is the time to talk about how much you can allocate to your investment portfolio.

First things first: investing doesn’t have to be about throwing your entire paycheck into the stock market. 

You can also buy fractional shares or invest spare change from everyday transactions (micro-investing).

The amount you’re ready to invest should directly reflect your financial goals and your living expenses, meaning:

• You should take care of your emergency fund first. Before investing, have a safety net that covers at least 3-6 months’ worth of living expenses.

• Then, decide on a percentage of your income for investments. Make sure you’re comfortable with it and then set up automatic transfers to your investment account.

• Prioritize debt. Credit card debt, student debt, whichever one you’ve got – patch those up first and then redirect towards investments.

Once you settle on a sum, even if it’s just a couple of spare dollars each month, stay consistent.

Small victories pave the way for big wins and they add up over time. 

(Just be wary of emotional spending when the market dips!)

3. Open an Investment Account

You’ve got your budget sorted, so it’s time to start talking about the stock market and investment accounts.

There are a few types of investment accounts, and these are the two that you need to know about right away:

• Taxable Brokerage Account: You use it to buy and sell stocks, bonds, and various other securities. You can access your money anytime you want, which is ideal for short-term goals.

• Tax-Advantaged Account: These are ideal for retirement savings. You have contribution limits and penalties for early withdrawals, but there are also plenty of tax perks that come along with them.

For instance, if you’re young and ambitious, you may want to consider a Roth IRA, which is a tax-advantaged, individual retirement account. 

Next, people who are already climbing the corporate ladder tend to dabble in taxable brokerage accounts for additional investments.

Freelancers and side hustlers? They often open a solo 401(k) or a Simplified Employee Pension IRA.

To find the right option for you, consult a financial advisor and do some research of your own online. 

And don’t put all your eggs in one stock basket!

4. Pick an Investment Strategy

This one’s tricky, because there are many investment strategies out there, and covering all of them in a beginner’s guide is…well, impossible.

But let’s talk about the things you absolutely need to know.

For instance, Index Funds and ETFs. 

These two give you exposure to a broad market index without the hassle of picking individual stocks.

Essentially, you get to own a slice of many companies without fancy fund managers charging you a fortune. You’ll experience steady growth over time, but there will be no moonshot gains.

Then there are individual stocks. 

They have higher returns (if you pick the winning ones) and you’re actively involved in them, but they’re risky and therefore require time and expertise.

Another popular investment strategy is real estate.

Property value appreciates over time and you can benefit from rental income, but it does require significant capital upfront.

Lastly, there are bonds. 

You lend your money to a big corp and they pay you interest regularly. 

They aren’t as volatile as stocks, but they have lower potential returns.

It’s best for you to mix and match a couple of these investment strategies to create a balanced portfolio. Once an investment tanks, others might thrive.

5. Understand your Investment Options

Here we are, at the end of our guide on how to start investing in 2024 – and let’s use it to talk about some of the most common investment avenues for you to explore.

First up are stocks!

1. Stocks

Companies issue stocks to raise capital for business growth and operations. 

When you buy them, you become a shareholder.

Over the long term, stocks can offer you substantial gains. Some companies may even pay dividends to you if you own their shares.

While they’re easy to buy and sell on stock exchanges, their prices fluctuate significantly, so it’s best to buy stocks of multiple companies to spread the risk.

2. Bonds

Governments and corporations issue bonds as a way of borrowing money from investors.

When you buy them, you’re essentially lending money to these institutions.

They aren’t that volatile, but they do offer lower returns – especially compared to stocks.

Ultimately, they can be a stable investment and a great way to earn extra income.

3. Real Estate

Whether you’re buying a residential home or land, you can profit from it by holding onto it until its value appreciates and then selling it for a profit; or renting it out. 

This can provide you with a steady stream of passive income, especially if you have a high-demand property in a desirable location. 

The main cons are that real estate investment requires a significant amount of capital upfront, and managing rental properties isn’t a piece of cake either.

4. Mutual Funds and Exchange-Traded Funds

To put it simply, these two investment options allow you to pool your money with other investors to buy a diversified portfolio of stocks, bonds, or other securities.

And the best thing?

You don’t have to make any investment decisions whatsoever. That’s what fund managers are for!

Keep in mind that some funds do charge management fees and that their performance largely depends on market conditions.

So, choose them based on your risk tolerance and investment goals.

5. Cryptocurrencies

An investment option that’s gained popularity in recent years is cryptocurrencies. 

Cryptocurrencies are digital or virtual currencies that operate on blockchain technology and can be used for online purchases, investment, or as a means of transferring value.

Bitcoin is the most well-known cryptocurrency, but there are thousands of others out there, including Ethereum, Ripple, and Litecoin.

Investing in cryptocurrencies can be highly volatile and risky due to their speculative nature and lack of regulation. Prices can fluctuate widely in a short period, and there's a risk of losing your entire investment.

However, they do have the potential for high returns and act as a potential hedge against inflation. 

Approach them with caution and only invest what you can afford to lose.

And if you’re interested in this investment option, see our list of companies to invest in that are leading the way in blockchain development.