By: Hong-An Phan
How to make your money make money.
For a vast majority, investing is a word that sparks interest and a wide array of responses. Some may have heard stories of misfortune, where friends had lost a great sum of money due to the outcome of a poor investment. Others may have heard of experiences where individuals worked to higher levels of wealth due to their long-term planning.
But how does one get started in a field with such a risky environment? Is it possible to make money and secure one's future without putting everything on the line?
First, one must recognize that investments are not gambles. Individuals should put their money into companies that they believe have the potential for future growth to successfully retrieve a return on their funding.
Furthermore, there are multiple kinds of investments that can be made. Besides common stocks, there are blue-chip stocks, which are those from well-established companies such as Apple or Tesla. These generally have less risk because of the prestige of the institution that is being invested.
ETF’s, or exchange-traded funds, are one kind of index fund. These market funds track the investment of a collection of stocks. For example, the S&P 500 is an index fund that tracks the top 500 companies in America. By investing in an index fund or ETF, investments are spread out over a wide variety of stocks, and risk is further minimized.
It is recommended for beginners or investors who are not interested in day trading to look into index and mutual funds due to their low effort and low-risk rewards. These types of investments are commonly automated by a brokerage app to withdraw a set amount of money over a period of time.
By spreading out investments over weeks, months, or even years, investors are practicing what is known as ‘dollar-cost averaging’. This is a technique to minimize volatility in an investor’s portfolio by ensuring that they do not attempt to time the market and average out the times they buy when the market is low or high.
Additionally, investing is a long-term practice. By spreading out the investing timeframe, compound earnings can be collected and higher rewards may be brought in.
There should not be a fear of investment because it truly is the tool of the future. Generation Z is rising to financial literacy and is learning to take advantage of the market to ensure their futures and life-long stability.
Photo By Anne Nygard, Unsplash.
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