Have you ever wondered what the expression “the rich get richer” means? How can one group of people get wealthier than another when everyone has the same 24 hours to work? Let’s look at some statistics to help explain: According to a Gallup Poll, 46% of Americans do not hold stocks or other types of investments.
Even more concerning, the Federal Reserve estimated that the wealthiest 10% of Americans control 92% of all equities. This means that the vast majority of Americans are missing out on the key to financial success: investing.
What exactly is investing?
Investing is defined as the act of allocating finances to an asset or committing capital to an endeavour with the hope of profit or revenue. Investing your money is what will allow your wealth to expand tremendously and allow you to decouple generating money from time management.
Consider the following tale to gain an understanding of what a wise investment selection looks like. Beyonce was asked to perform at an Uber company party before the business went public in 2015. They offered her $6 million, but she declined, preferring to be compensated in stock options. The price of those shares fluctuated after the company went public, and it is now worth closer to $300 million. This is only one example of recognizing and capitalizing on wealth development. Instead of accepting cash, Beyonce elected to be compensated in the form of stock options, the value of which can rise over time.
Although you are unlikely to be asked to perform for emerging tech companies, there are numerous methods for you to invest your money so that it can develop.
So, what are some decent options to begin investing? Let’s explore.
Where do you even begin?
Let’s look at some of the most common sites where people invest their money, as well as the benefits and drawbacks of each.
1. Stocks are shares of a corporation that can be purchased and sold by the general public. They trade on stock exchanges such as the NYSE, Dow Jones, and Nasdaq. Stock prices fluctuate according to how much individuals are willing to pay to purchase or sell them.
- Pros: Very liquid (can be purchased and sold rapidly), potential for growth and income (dividends), historically a rather safe area to invest.
- Cons: Limited post-investment control, volatile and difficult to predict.
2. Fixed Income – Securities such as bonds and treasury bills in which the issuer undertakes to pay the holder a fixed payment until the end of the term. It functions similarly to an I.O.U.
- Pros – Very safe, produces a consistent income.
- Cons: There is no room for development, there is still a risk of default, and the return is low.
3. Real estate is the investment of money in land or a building.
- Pros – A lot of control, and it may be highly profitable.
- Cons – Difficult to get started, requires more capital, and is highly illiquid.
4. Buying Cryptocurrency.
- Pros – There is a lot of room for growth and the possibility to make a lot of money quickly.
- Cons: No control, unpredictable prices, potential for large losses in the short term.
5. Invest your money in a business in exchange for a percentage of the profits.
- Pros – A lot of control, a lot of room for growth.
- Cons: This investment needs more effort than others.
Platforms for starting out?
These are some companies in which you can begin investing.
Robinhood is the most user-friendly platform for buying and selling stocks. They allow you to buy and sell stocks, ETFs, mutual funds, bonds, and other securities via your phone for free.
Betterment is a well-trusted online brokerage that offers cheaper rates than traditional brokerages for retirement accounts (IRAs, 401(k)s, and so on).
To purchase real estate, Fundraise is a platform that invests in and maintains a portfolio of properties. Individual investors can then purchase shares in their funds.
Nextseed vets local businesses and posts only the most promising.