Beginner’s Guide to Investing: Stocks, Real Estate, and More

Investing is one of the most effective ways to passively generate income. When you invest wisely, you take your money and turn it into more money without putting in any more hours at work, selling things, or actively taking steps to generate more income.

However, the world of investing can be intimidating, thanks in large part to the how many options you have.

There are also some misconceptions about investing. Many people assume that you have to already be relatively wealthy to get into investing. While investing is an excellent way to build wealth, it’s not something that’s reserved for those who are already wealthy. No matter how much money you have, you can start investing.

While you may not be able to buy a property to fix and flip on your own, there are still paths for you to turn your money into more money through investing.

Today, learn more about investing for beginners and how you can start building your net worth with the money that you have.

The Basics of Investing

Before we delve into the specific types of investing that you can use to build your net worth, it’s crucial to understand some of the basics. Investing is not a “get-rich-quick” concept. If anything, it’s a long-term move that occasionally provides some short-term benefits.

The odds of you putting some of your money into a particular type of investment and getting a positive return quickly are slim. This doesn’t mean that it never happens, but if your goal is to make more money quickly, most types of investments are not the best path for you.

Instead, people who invest their money do so because they want to generate positive returns through dividends, interest, and other avenues. Investing is a great option for those who are willing to patiently wait for the money they invest today to turn into more money years in the future.

You should also spend some time establishing your goals and building your strategy. For instance, do you want to invest so you can save up enough money to buy a home, or are you trying to build a retirement account?

The goals that you have will dictate what type of investments are best for you. Also, take some time to consider how you feel about taking risks with your money. More risk-averse people typically don’t invest in investment options that are more risky.

Instead, they choose the safer route, which may not generate money as quickly but poses less risk of losing money.

Your strategy and goals are unique to you, so it’s important to spend some time researching your options. Now that you know some of the basics about building your strategy and setting your goals, let’s take a look at some of your options.

Investing in Stocks

Playing the stock market is what most people think of when they think of investing their money. When you buy stock in a publicly traded company, you purchase an ownership stake in the company.

Some of the biggest companies in the world like Google, Wal-Mart, and Amazon are all publicly traded. They use the money that investors put in to pay operating expenses and grow the business. When the business grows, those shares become worth more and investors start making money on the dividends.

While this seems like a straightforward method of making money, the stock market is risky. Investing in a company as large as Amazon or Google takes a lot of money because individual shares are worth so much.

This means that it’s more affordable to invest in companies that aren’t worth as much yet, but those companies come with risks. If the company collapses, you lose the money that you invested.

This is why most people diversify their stock market investments. For instance, if you invest in Wal-Mart stock, you may not want to invest in other retailers. Instead, you would consider adding a tech company. This helps you keep the potential downfall of one industry costing you more money.

Real Estate Investing

In the past, real estate investing was something that only the super-wealthy could take part in. It wasn’t all that long ago that the only way to invest in real estate was to purchase a property that you would either sell for a profit or convert into a rental property. While those are still viable options, they’re not the only ones.

REITs operate very similarly to the stock market. The acronym stands for Real Estate Investment Trust, and it operates by bringing in money from investors in exchange for ownership stakes in different types of properties.

For instance, a REIT may own an apartment complex, a shopping center, and a medical research lab. If you invest in the REIT, you can own a stake in all three of those properties, which entitles you to a portion of the profits they generate.

Of course, you can also take a more traditional approach to your real estate investing. If you have access to the money or can get approved for a mortgage, you can buy a home and then use it to generate income, either by selling it for more than you paid or renting it out.

Real estate is one of the most diverse types of investments that you can make. Combined with the fact that people will always need shelter, investing in real estate is one of the most proven types of investments in the world.

Investing in Bonds

At one point in American history, bonds were among the most popular investment options. For instance, around the time of World War 1, the American government sold bonds, which were essentially loans given by American citizens in exchange for the government’s promise to pay those loans back with interest in the future.

While bonds aren’t necessarily as popular today as they were then, they’re still a viable investment option. Additionally, bonds don’t only come from the government, but there are also companies that issue bonds.

For example, you may purchase a bond from the government or a business for $1,000. Depending on the terms associated with that bond, the entity that sold you the bond will pay you back your initial investment of $1,000 plus interest when the bond reaches full maturity.

These bonds give the issuing entity access to immediate funds while allowing investors to turn their initial investment into more money in the future.

Crowdfunding

Before we dive into how crowdfunding works, we should be sure to discuss some of the methods that don’t provide a normal return. There are websites out there that allow companies to presale items that they’re trying to bring to market.

While these technically fall under the heading of crowdfunding, you don’t receive any financial benefits for giving them your money.

However, there are other crowdfunding platforms that allow people to invest in startups. If you’ve ever seen this ABC hit show “Shark Tank,” you have a working knowledge of this concept. While you probably don’t have the amount of money that the sharks (investors) on that show have, you can still get in on the ground floor of startups by giving them money in exchange for an ownership stake.

This method allows startups who have not reached the level of publicly traded companies to bring on investors in exchange for equity. However, you need to understand that this is one of the riskiest types of investing.

Most startups never make it past the earliest stages, so if you opt for this method, the odds of you getting your money back are not good. However, this investment method continues to be popular, especially among investors who don’t care to take risks with their funds.

Start Investing Today

Once you know your goals and your investment strategy, you’re ready to start investing. With so many options out there, you’re sure to find something that works for you.

Spend some time researching different companies that operate in the area that you’re considering and make informed decisions. You can turn your initial investment into more money as you pursue your financial goals.