How to invest money wisely
The rights to investment aren’t just reserved to the rich and wealthy of the society. Even if you are middle class, you can spare some money for investments. There are always different options for different kind of cash you have for investment, whether it is a few hundred dollars or a few thousand dollars.
There are many investment options but how much money you can spare for investments is decided by your current financial situation. First of all, you need to understand that money does take some time to grow. So you should be willing to wait patiently before you start seeing results. Not all the investments are risk free. You need to have some degree of risk appetite as no investment plan can offer guaranteed returns. If you have some immediate liabilities to take care of, you may need to consider them as well before setting aside money for investment. Immediate liabilities could include a debt, such as mortgage or credit card bill. You must also have an emergency reserve before you start investing to make sure that in the event of an unforeseen and unfortunate situation, you have a backup.
Tip No. 1: Cut down on your luxury expenses. This could be the most difficult thing for you to achieve but has to be achieved nonetheless if you are planning for long term benefits through investments. You don’t have to cut down your meals. Spend whatever you need to on your necessities but don’t buy things that you really don’t need. You also need to build up your emergency funds, if you don’t have already, before you start investing.
Consult and learn: The question is how to invest money wisely? You need to understand the nature of investments and this can only be done by reading and talking to the experts. Do not counsel the sales agents or brokers. Get yourself informed through all the investment books you can lay your hands on and talk to the financial experts who will have no vested interest in your investments.
Where and how you invest depends a lot on how much money you have. Here are some tips on how to invest money wisely.
You have less than $100 to invest: You can invest in Direct Stock Purchase Plans (DSP) or Dividend Reinvestment Plans (DRIP). With these plans minimum investment value is $50.00. One of the biggest advantages of investment in these plans is that you purchase stock directly from the company and avoid any unnecessary fee that may go to the broker. Not all the companies have these stock plans but many do. You can also invest in low requirement mutual funds. In such mutual funds, the investment value could be as low as $25.00 but the bank may ask you for a minimum investment plan every month.
You have up to $1000 to invest: With more money, more options become available. For anything up to $1000 (even $500 will do), you can invest in index funds, purchase stocks using discount brokerage, or fix the money in certificate of deposit (CD).
You have more than $5000 to invest: With this kind of money to invest, you can either choose any of the options above (index funds, discount brokerage or CD) or you can get yourself a retirement account.
There is no limit to what you can or what you should invest. Whatever money you can possibly spare out, without cutting down on your necessities, you should invest. You should be very clearly able to tell luxury from necessity. A diamond ring that brings smile on the face of your wife is a necessity (it is also an investment by the way) but getting drunk in an expensive bar and spending $1000 in one night is a luxury.