Saving and investing are important ways to build wealth. Once the saving part is taken care of, people might be left wondering how to start the investment process.
Bank of Luxemburg has some helpful guidelines to follow:
1. Get Guidance
*Choosing a good investment requires guidance. Gather information from newspapers, magazines, and credible sources online. Seek advice from banks and other financial experts.
2. Take Advantage of Compound Interest
*Money grows quicker when investors are paid on previously earned interest as well as on the original deposit or investment.
3. Understand the Risk-Expected Return Relationship
* Generally, the higher the risk of losing money, the higher the expected return. The lower the risk, the lower the rate of return.
4. Start Small
*The simplest way to begin building wealth is to open a savings account, and take advantage of compound interest with no risk involved.
5. Diversify Investments
*Once a good savings foundation is established, diversify assets among various types of investments including bonds, stocks, and mutual funds.
6. Invest with Retirement in Mind
* Consider the sum of money needed to retire, taking into account inflation. Use this information to decide how much money to invest today, and utilize IRAs, 401(k) Plans, or Qualified Plans (if self-employed).
7. Consider Other Means
*Wealth can also be built by taking advantage of 15 year mortgages rather than 30 year mortgages to increase equity, by starting a business, or by investing in things that rise in value over time such as land, antiques, and art.