How to Invest: A Basic Guide to Making Your Money Grow

Investing is more than just saving for the future — it’s about creating a wealth-building strategy to truly make your nest egg grow. That’s because investing typically earns you a higher interest rate than if you put all of your money in a traditional savings account.

While historically low rates are great for when you need to borrow money, they’re pretty dismal when you’re ready to start saving. Investing does come with a higher risk, but it can generally be mitigated with diversified holdings and long-term positions. Plus, it’s easier than ever.

You’re not limited to working with an expensive brokerage or saving a huge amount to reach a minimum investment threshold. Now you can even invest by using an app on your smartphone with the leftover change from your checking account.

Ready to learn how to invest? We’ve got you covered with everything you need to know.

The Benefits of Investing

The reason why money grows so aggressively through investing is that it’s powered by compound returns. Investments are generally meant for a long-term strategy, rather than taking out money every few months.

When you leave your money untouched in an investment vehicle that offers greater returns than a savings account, your gains continue to compound.

No matter what age you are, it’s a good time to start investing. If you’re younger, you can create a strong foundation to truly accumulate wealth over the coming years.

Even if you’re older, you may be able to catch up faster because of those higher returns. Don’t worry about getting started — even if you can only contribute a small amount each month, you’ll set up the infrastructure and challenge yourself to contribute more as you begin to earn more.

How to Reduce Your Risks in Investing

When investing long-term, you can’t think about your every day gains and losses; instead, think about how your allocations are performing in the long run. You do want to review your investment choices as you reach different stages in your life; in particular, becoming less aggressive as you get older.

In fact, most investors don’t partake in volatile day trading. They spread their money over diversified investment types to help reduce risk and maximize returns over time.

There will always be economic cycles with highs and lows. But even downturns can be mitigated in your investment portfolio by spacing out your money over different product categories as well as different economic sectors. This can go a long way in protecting your money over time.

If you do want to try out some riskier investments, make sure you view that money as discretionary risk capital, meaning your livelihood and well-being won’t be impacted if you lose it all.

How to Invest Your Money

Diversification is important as is setting reminders to review the performance of your picks, such as a quarterly review. It also helps you adjust your asset allocation based on your own financial goals. Are you trying to retire earlier than you initially planned? Are you able to contribute more each month?

With these strategies in mind, here is a comprehensive review of different investment vehicles you can take advantage of in order to accumulate wealth over time.