However, investing isn’t as black and white as you may think. You may think that it’s about putting some money into a certain stock and watching it either rise or drop. Although this is the basic premise of investing as a beginner, there’s a lot more to it including how you can invest. Here are the three most popular methods for new investors.
Bonds
Bonds are an ideal first choice because of how secure they are. How they work is that you put money into a corporation, or even the government, and pay off interest payments. The interest rate depends on what the bond is for and who you’re getting it from. You may be wondering how you can profit off of this. As soon as all is said and done, the person who issued the bond pays back every cent of the investor’s money. The reason why bonds are considered to be less of a risk is because they’re a fixed-income type of investment. Just remember that bonds can potentially have lower returns, but this doesn’t matter too much for those who are starting out.
Day Trading
Day trading is a form of investment that’s not commonly brought up. It’s basically when you buy stocks and sell them again within a day’s time. At first glance, this doesn’t seem very beginner-friendly. However, day trading is actually doable as a novice investor. You’re not exactly buying big stocks owned by major corporations. Instead, you’ll be purchasing something known as a penny stock. A penny stock is a type of stock that can be traded for five dollars or less.
Because of how high-risk investing in a penny stock can be, day trading is a fantastic way to introduce new investors to risks. However, because there’s so much to learn about day trading, you might feel a bit overwhelmed by it. But you can make things easier on yourself by reviewing a guide on day trading. Not only will you gain a better understanding of the basics, you’ll also learn how to strategize effectively and determine which penny stock to keep your eye on.
Stocks
Next is the most common method of investing, stocks. When you invest in a company’s stocks, you’re essentially buying a small portion of its current earnings. Many companies sell fractions of their assets in order to raise money quickly and keep themselves financially stable. How much of a profit you’re able to procure depends on how well the stock is doing. If the rate goes up, so does the value. If it lowers, then the value lowers with it and you won’t be able to sell it.
Stocks are the epitome of high-risk and high-reward because of how fickle they can be. You don’t know what could happen in the future. For example, your stock could be doing well for years at a stretch and then suddenly plummeting in value within a week. Therefore, it’s important that you keep an eye on the market, so you can make swift decisions and not lose your financial footing.
