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Five Best Investment Ideas for Beginners

Coins in a jar

When you’re first getting started, the thought of investing might be daunting. However, saving for and amassing cash to support your spending is crucial. Don’t get too caught up in whether or not now is the right time to start investing because you’ll meet various market circumstances during your investing life.

Before making any financial commitments, new investors should determine their comfort level with risk. You don’t want to be surprised after making the investments because you didn’t know that your investment was subject to a higher level of risk than you thought it was. So, you should carefully consider whether or not you can wait several years to withdraw the money you plan to invest.

If you are just starting your investment journey, here are some investment ideas that could benefit you.

1. Exchange Traded Funds

Exchange Traded Funds or ETFs are a hybrid of index funds and equities. It is similar to a regular index fund. But ETFs invest their capital into various assets from a specified class like currencies, shares, etc.

However, the difference is that you don’t need to buy a unit in an ETF just like you would in a managed or index fund, but you can buy an ETF’s shares. It is similar to purchasing equities on a stock exchange which can be sold and traded as per your choice.

So, if you have been consulting with a financial planner, you would know that ETFs are the safest option to start building your investment portfolio.

Purchasing ETF shares is cheaper, quicker, and more flexible than buying units in any managed fund. It offers a more straightforward and smart way to invest in the range of assets of an index. However, when trading ETF shares through a fund manager or broker, you would need to bear brokerage fees just like when trading regular equities.

2. Government Bonds

Many companies, along with the federal government, use bonds as a tool to solicit financing. Think of it as the government’s way of crowdsourcing funds from the general public. So, if you purchase a bond, you will be paid back along with interest as per the pre-defined time frame and interest rate.

The reason you should start with bonds is that they are considered low-risk. It is because they represent the debt that has to be paid within a stipulated timeframe. Moreover, the pre-defined interest rate and maturity date allow you to calculate exact gains.

However, there is one trade-off. Bonds offer lower gains than other investment options like real estate or ETFs as the returns are impacted by inflation. Moreover, bond maturities often last up to 25 years which is not too lucrative if you are looking for short-term gains.

3. Real Estate

Rental housing is the most profitable investment, but only if you are willing to manage properties and their related issues. If you pursue this route, first, you must select the best possible property. Next, you need to either buy it outright or finance it. And last but not least, you need the temperament to deal with all types of tenants while maintaining it.

So, if you have all these qualities, you can do very well with rental housing and grow your money faster than other beginners. However, rental housing is great for long-term investors willing to manage the property and generate consistent cash flow.

Similarly, you won’t enjoy the comfort of trading your assets just like you would in a stock market with a tap on your internet device. So, despite a gradual increase in mortgage rates, it is still a good time to finance the purchase of your new property. Remember, if you hold the property over time and pay down debt gradually while growing your rent, you will be able to enjoy a healthy cash flow by the time you retire.

4. P2P Lending

Peer-to-peer or P2P lending essentially involves two people. In this arrangement, one wants to borrow money, and the other wants to lend. While this kind of arrangement can be theoretically sorted amongst mates, it is usually facilitated by a 3rd party online platform that acts as an intermediary between borrowers and lenders and charges a small fee for their services.

So, how can you start your investment portfolio with P2P lending? Well, being a lender in a P2P setup, you can lend out your money and earn interest income on it. In other words, you can act like a bank with fewer formalities. Moreover, in this arrangement, you get the option to choose the borrowers you are willing to lend personally.

One reason beginners opt for P2P lending is that they can easily start with less money. However, you need to understand that this arrangement doesn’t offer many guarantees as provided in other traditionally structured lending or investments.

5. Annuities

If you have heard this term before, you would know that it’s popular as a retirement option. The best part; annuities offer a guaranteed income no matter what’s happening in the financial market. There are two types of annuities. First, a series of regular payments over a set number of years is known as a fixed-term or lifetime annuity.

However, the payments you are entitled to receive will depend upon the invested amount and actuarial calculations that help estimate future outcomes by analyzing the demographic and economic trends.

As a beginner in the investment world, you can purchase an annuity using your everyday savings. However, if you have a reasonable sum of money at your disposal and plan to put it in annuities, beware that you will not be able to use or access it until your preservation age and retirement.

Final Words

Diving into the world of investment is a scary but great idea. After all, it’s never too early to start investing. However, before putting your hard-earned money into any of the investment options discussed above, it is essential to make sure that you fully understand the opportunity and its dynamics.

Make sure you are comfortable with the risks, the required amount, and the investment timeframe, and understand how it could help you fulfill your financial goals.

So, if you have already contemplated your options, act consistently as an investor than a speculator and let your money work hard for you and your future. Good luck!


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