Young people embarking on a way of financial freedom often ask themselves a question – is saving better than investing? What will each of these give me in the long term? There is no straightforward answer to this subject – both pros and cons should be considered. Every year the format of long-term business investments becomes more and more popular.
However, when faced with it, novice investors have a lot of questions that give rise to doubts and fears, which are passionately fueled by those who have failed.
Let’s not be realistic – no deal with the investment of own funds does not give a 100% guarantee that it will be successful. And this is a fact that should be accepted, but in order to start from it, it is essential to try and never give up. Though, 2020 showed that unexpected events like the coronavirus pandemic can turn everything upside down. It should be understood that the success of investment depends on a well-designed strategy, otherwise, the probability of failure is quite high.
So, what does a beginner need to know to become a successful investor? We think that investing is always better than saving money. Let’s have a look at various methods below.
Ways to invest
The big mistake is to assume that investing money for profit is a lottery. There are always risks, but they can be minimized, and for this, you need to choose promising investment options. We will not delve into each of them – you, as a novice investor, still need to see the big picture.
Deposit is the easiest and safest method of investing. Some people even keep money in a bank account which is perfectly fine, because you can accrue an interest rate and gain some profits in the long run. This is one of the most promising options when it comes to investing because you keep funds on a particular account and after some time you get an increased sum of money. It is advisable to add as much money as possible to your account because the interest will be higher. Depositing money on your account is recommended for young investors, who want to earn more money in the long term.
MIF (Mutual Investment Funds)
Mutual funds are companies that buy/sell stock market assets, distributing depositors’ funds to various securities. By investing in MIFs, you become a co-owner of the fund and delegate the management of your funds to professionals. A mutual fund is not a bank, so don’t expect interest. However, the difference between buying and selling can be both positive and negative – MIFs do not guarantee income.
Stocks are the main thing why we think investing is always better. It can be an excellent source of passive income, and quite solid, such as an IPO. But the problem is that for the novice investor it is very difficult to understand which securities to choose from a huge number of options, especially when each of them looks really attractive.
Investing in precious metals is always associated with stability. Gold can be bought in the form of bullion or coins, but the most modern ways are opening an impersonal bank account or investing in shares of gold mining companies. However, it should be taken into account that precious metals have low profitability, and “metal” bank accounts are not insured by the state.
Non-state pension funds operate on the principle of multi-level administration and cannot go bankrupt by law. NPFs involve long-term (for at least 10 years) investment and are a good option to save money for old age.
The peculiarity of this type of investment is the high starting threshold of deposits. But no matter what the method of earning income, the invested funds are guaranteed to pay off – most often in the long run.
There are many other investment options, each of which has both pros and cons. For example, when investing money in a startup you can get 1000% of the profit, but even more likely to be left with nothing. Cryptocurrency has an unstable rate and is dependent on technologies that change from time to time. Domestic bonds require large investments, and art objects require a deep understanding of the market.