In this article, we look at how to get started investing.
Investing evokes fear in many young people. There is a perception today that investing is a high
stakes gambles where you will probably lose all your money.
This is especially true for millennials. A survey by bankrate.com found that only a third of
millennials have invested in the stock market. This is particularly worrying as the stock market
outperforms cash by 99% according to a study by Barclays.
If you are choosing to invest in the market, you have made the right choice.
What Should I invest In?
There are many investment options – maybe too many. You can invest in stocks, property or
alternative assets. Within these categories there are thousands of options.
It makes sense however to begin investing with stocks. Stocks are a solid investment choice –
they are straight-forward to understand and they also offer many options for diversification.
Unless you choose to invest in property funds, you will need to take on debt to fund a venture
into property. Any sensible person will tell you that debt is a terrible idea if you do not
understand it. Some even argue that is terrible full stop.
Alternative assets are another option. These include investing in private equity, venture capital,
or boutique funds that invest in assets such as art, or vintage cars. Some of these investments
have provided incredible returns in recent years. Still, they are maybe too specialised for
someone who is just starting.
What Stocks Should I Invest In?
Investing in stocks is very satisfying, however it is difficult to generate higher than average returns.
According to recent statistics, 86% of fund managers fail to beat the market, or generate substantial
investment returns according to the Financial Times (paywall).
A safer investment would be to invest in index funds.
Index funds invest in a basket of companies in the market. If you invested in the S&P 500 index
for example, you would be investing in the best 500 companies in the US at any given time.
These indexs are flexible and most companies cannot stay in the best 500 category forever.
Nevertheless, the index fund ensures you are exposed to the best companies available.
The number of options out there for investors is incredible. Index funds are the most practical
means of investing in the stock market and protecting your wealth against inflation.
Until you learn about other forms of investment, they are a safe means of investing in the stock
It is certainly not difficult to get started investing. With a basic understanding on index funds and how to get started investing, you can allocate capital in a large basket of companies like the S&P 500.
If you want to learn more about index funds, read our brief on them here.