Despite what
you may think, investing is for everyone.
When it
comes to investing, the best thing you can do is start.
I’ve been
emphasizing this for years with clients and friends who ask how, when or where
they should invest. As I’ve told them, the sooner you start the faster you can put
your money to work for you.
The worst
thing you can do is become overwhelmed, freeze, and end up doing nothing.
Though getting
started can be a struggle, following through on the ideas below will help you make good investments this year.
Stock market
While it is common advice, the stock market can offer excellent investment return
opportunities for you.
After all,
most millionaires earned their wealth through building and owning a business.
For most of us, the next best thing is owning stocks which represent an
ownership stake in a public company.
Even though
stocks are at all-time highs you will benefit from putting your money to work
in the market rather than sitting on the sidelines waiting for the right
opportunity. Ultimately, the market can continue to go higher for far longer
than anyone can accurately predict.
Accordingly,
you can benefit from using dollar cost averaging. That is, instead of putting
all your money into the market at once, start by investing 10-20% before
adding more. For example, if you have $1,000 or more saved start investing $100-$200 in the market on the first of every month. As a result, you will gradually increase your
investment. Over time the cost of your investment will be calculated as a
dollar-cost average each month throughout the investment period, hence the
name.
There are two reliable options for where you can open your investment account. You could
open a self-directed online brokerage account with a company like TD Ameritrade
or ETrade where you will be able to choose how your money is invested. Another
option would be for you to open an account with a robo-adviser like Acorns or
Betterment that will create a portfolio for you based on your risk tolerance
and goals for your money.
No matter if
you choose to use an online broker or a robo-adviser, you should invest this
money into an Exchange Traded Fund (ETF) that tracks a major market index. For
example, the ETF with a ticker of SPY tracks the S&P 500 Index which mimics
the performance of the 500 largest publicly-traded US companies. This ETF will
allow for you to get market-like returns without costing as much as a mutual
fund, which ultimately keeps more money in your account.
Real Estate
At this
point in the economic cycle inflation and general business conditions are
beginning to speed up.
Simply put,
this means that inflation-sensitive investments that benefit from a strengthening
economy, like real estate, should prosper.
If you want
to invest in real estate there are several options.
First, you
could opt for the traditional route of buying. You can either buy at the market
price or find a house at a wholesale price. After purchasing a home you could
either use it as your primary residence or turn it into a rental property. The path
you choose will depend on your personal needs.
Second, for
those of you more interested in real estate investing for potential short-term
price appreciation then fixing and flipping properties could be an option. But
just as with any other investment, be sure to study the craft, learn the market
trends, and begin to test your ideas before committing money to a project.
Of course,
one drawback to traditional real estate investing is that it takes a
considerable amount of capital to cover a down payment and costs involved at
various stages. However, there are a few options for smaller investments in
real estate.
First, you
could invest in ETF’s specializing in real estate. These ETF’s function just
like a stock market ETF, except they track an index of real estate investments
instead of an index of stocks.
Second, some
individuals invest in Private Real Estate Notes. As in investor in a Private
Real Estate Note you are the recipient of a portion of the monthly interest payments.
This can be an attractive option instead of keeping money in traditional cash
investments with lower interest rates.
Similarly,
the third option would be to invest in private real estate deals through a
platform like FundRise. In essence, FundRise democratizes the private ownership
of commercial properties which have long been a source of wealth creation for
big institutions and high-net-worth individuals.
Throughout
my work in the investment field private real estate investments were exclusively
available to investors with a household net worth over $1 million. As a result,
most people have been excluded from consideration for this investment option. Consequently,
their portfolios have been limited to a mix of stocks and bonds traditionally.
However, research has shown that a better portfolio allocation can be built to
minimize risk and increase return by including private real estate.
An Investment in Yourself
As Ben
Franklin said, “An investment in knowledge pays the best interest.”
While it’s
nice to see investments in the stock market and real estate grow your account
balances, if you do not invest in yourself you will not have anything to offer.
Without
continuing your education through reading books, listening to podcasts,
attending seminars your skills from high school, college and your work will
quickly become obsolete.
To emphasize
how important it is to read consider that the average CEO reads 60 books a year
while the average employee reads only one. Accordingly, C-Suite executives are
financially rewarded for acquiring additional skill by earning an average of
300 times more than the average employee.
Summary
As you can
see finding a way to invest isn’t as difficult as it may have seemed.
Sometimes
the hardest part is getting started.
But be
creative, do your research, and take action with investing.
Hopefully
these three investment ideas will help you get moving toward investing and
having a better chance of realizing your goals in 2018.
As always,
feel free to contact me with any questions or comments. Thanks for reading!
John
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