Top advices for how to multiply your money. If you want to be hands-on and enjoy making investment decisions, you might want to consider buying individual shares – but make sure you understand the risks. If you don’t have the time or inclination to be hands-on – or if you only have a small amount of money to invest – then a popular choice is investment funds, such as unit trusts and Open Ended Investment Companies (OEICs). With these, your money is pooled with that of lots of other investors and used to buy a wide spread of investments. If you buy investments, like individual shares, direct, you will need to use a stockbroking service and pay dealing charges. If you decide on investment funds, there are charges, for example to pay the fund manager. And, if you get financial advice, you will pay the adviser for this. Whether you’re looking at stockbrokers, investment funds or advisers, the charges vary from one firm to another.
There are many ways to pick stocks, and it’s important to stick with a single philosophy. Vacillating between different approaches effectively makes you a market timer, which is dangerous territory. Consider how noted investor Warren Buffett stuck to his value-oriented strategy, and steered clear of the dotcom boom of the late ’90s—consequently avoiding major losses when tech startups crashed. Investing requires making informed decisions based on things that have yet to happen. Past data can indicate things to come, but it’s never guaranteed. In this 1990 book “One Up on Wall Street” Peter Lynch stated: “If I’d bothered to ask myself, ‘How can this stock go any higher?’ I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that.” It’s important to invest based on future potential versus past performance.
The answer is by buying an index fund. Index funds are the best friend of the passive investor who want an easy way to invest in the market. An index fund is a type of fund with a portfolio constructed to track a certain index. Index funds can track the return of the S&P 500, Dow Jones, or NASDAQ. Index funds can either be exchange traded funds or mutual funds that hold securities in a given market. A S&P 500 index fund will buy shares of the 500 largest companies in the United States and will track the movements of the Standard and Poor’s 500 index. This fund will replicate the performance of the S&P 500 index. If the S&P 500 index is up 10 percent for the year then a fund like the Vanguard S&P 500 index or the iShares S&P 500 index should be up approximately 10 percent as well. Read more on Easiest Way to Invest Money.
Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors. The trouble is many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach. But some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between $50 and $100. Automatic investing is a common feature with mutual fund and ETF IRA accounts. It’s less common with taxable accounts, though its always worth asking if it’s available. Mutual fund companies that have been known to do this include Dreyfus, Transamerica, and T. Rowe Price.
“The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive.” Warren Buffett says that the best investment one can make is on his/her own abilities. Most people are not going to make most of their money from the stock market. They’re going to make it from their careers. So put yourself first. Buffett’s partner Charlie Munger had a similar thought. Munger’s secret to success: sell yourself an hour each day, and use that hour to make yourself better.
About MultiplyMyMoney : I have more than 12 years of experience as an independent and personal financial and investment consultant. I used to run a financial blog called BuylikeBuffett which provided insight on investing, saving, money management, and all things finance. I am also the author of Your Financial Playbook: A Guide To Navigating The World Of Personal Finance a financial guide written to inform the beginning investor about the basics of the market. I decided to start a new site because I receive a great number of questions about financial topics on a daily basis. I figure that this would be a great way to answer those questions and increase financial literacy. I also figured it would be a good platform to write articles on everything from teaching how to get rich, explaining the basics of cryptocurrency, to detailing ways of rebuilding your credit score. I was the founder and president of New Horizons Financial Management, LLC, and was a registered investment advisor. New Horizons was an independent investment advisory asset management and personal financial consulting firm offering investment advisory services to high net worth individuals. See extra info at Multiply My Money.