One common misconception is that it takes a pre-existing wealth to start investing. Actually, a spare sum of, say, $50 can be your entry ticket into the world of return-yielding investments. Also, apart from the stock market, there are other methods, too. Each comes with a different set of options, risks and interest rates. Choosing the right one will depend on your proficiency, namely whether you’re a seasoned investor or just getting started. And, most of all, the financial resources at your disposal.
A major piece of advice for the beginner would be not to use up the bulk of his/her savings for investing, especially since low-risk investments take time to make a profit. Be advised that this period can take years. Hence, a well-thought out investment plan would imply always keeping an adequate sum as a reserve.
Here are some practical tips for a beginner aiming to avoid investing in the stock market. If you prefer to invest in the stock market, you can use tools like StockTwits and the Finviz screener to find better stocks to trade. We will highlight some that are considered both profitable and safe:
Investing in real estate
Investing in real estate will require a sum much larger than the aforementioned $50. However, it is a market that yields large profits, and is considered a safe investment. Namely, when you invest in a tangible asset (real property), you can be certain that it will be sought-after in the future, hence profitable.
There are several ways to go about jumping into the real estate market. They include rental (if you already own a property), real estate flipping (buying and reselling), capital appreciation (rise in market price). Depending on your financial situation, you can buy property as the sole owner, or partner up with someone else. Another option is to invest in a company that owns profitable real estate (a real estate investment trust).
Investing in gold
Speaking of tangible (and safe) investments: gold. It may seem old-fashioned, especially in our current globalized and digitized economy. However, many leading economists argue that the value of gold will only increase in today’s unpredictable market conditions. In case of another recession, some predict the value of gold to rise to $10,000 per ounce.
Unlike currency, gold is not devalued by inflation, and is typically resistant to great market upheavals. And when thinking of investing in gold, you should think in broader terms than just jewelry. You can buy gold in various forms – bars, ingots, coins, etc.
Like real estate, peer-to-peer lending is considered a rather safe investment. Unlike real estate, however, it does not require having a large sum at your disposal. What is P2P? Through a network, or rather, a company, you give loans to your peers. You gain profit by means of interest rates which apply when your peers pay you back.
By lending (investing, actually) to a multitude of peers, you will reduce the risk of a borrower not repaying the loan. That way, if one of them does not make his/her payment, damages are minimized.
Companies that provide such services and network include the likes of Lending Club, Peerform and Prosper. Their websites will make for a good starting point with regard to P2P lending.
Investing in bonds
If you are about to make your first investment, another way to go would be bonds. A bond represents an investment whereby the investor loans money to an entity (governmental or corporate), for a defined period, at a fixed or variable interest rate. The sum that they loan determines the price of the bond. As for the profit, it stems from the interest that each investor receives as part of the loan. But bear in mind that higher interest rates typically also involve increased risk.
We have singled out some of the investment methods for a beginner aiming to avoid the stock market. As you have seen, in terms of resources needed, risk and profits, they all have their pros and cons. Before you make any decision, it is imperative to have a good look at your assets, needs and projected timeframes. The best scenario would be to save up a sum which you can “forget about” for a certain period and use only for investments.