How to Start Investing

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Written by Roanna

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investing

Investing a good way to build wealth and it is always better to start investing as early in life as possible so you can benefit from compound interest more. Here are some important steps on how to start investing:

1. Prepare your finances for investing activities. Make sure that you have a budget, an emergency fund that will cover 3-6 month of your expenses in case of job loss or sickness. Pay off your credit card debts and loans.

2. Have money to invest. Increase your salary and bonuses, commission, generate extra and passive income and so on and decrease your expenses. You need to have cash available to start investing

3. Start early. The compound interest on all of your investments will have more years to work, bringing you more interest and dividends money

4. Decide on type of investments you are willing to do. It is good to figure out if you are very conservative with your money and would prefer low-risk and lower return on investment or you prefer to have better returns that usually come with higher risks.

5. If you decide to go for low risk investments than the options like bonds and mutual funds and 401 K investing will be the good ones for you.

You can start investing in bonds which usually has a return rate of around 5%. The great thing about investing in bonds is that some of them, like municipal bonds will set you free from paying taxes on your gains.

Mutual funds gather funds from hundreds of investors and manage big portfolio of stocks, bonds or other securities. It is a good practice to invest monthly into mutual funds.

6. Another option is to put your own portfolio together by investing in different stocks. Make sure that you choose to buy stocks from companies within different sectors of economy. Academic researchers suggest that one should hold from 30 to 50 stocks to diversify successfully.

One can start investing in stocks by opening and online trade account with one of the online brokerage, like etrade.com,sharebuilder.com, scottrade.com, sogotrade.com and others, which usually just charge $4 to $9 per trade.

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