You want to build real wealth, but like a lot of people, you aren’t sure where to start. One thing you’ve possibly heard over time is that, in addition to investing in things like real estate, you should be looking into bonds or stocks and learning because they can be reliable investments that provide a healthy return on investment.
What you’ve heard is true. Unfortunately, you aren’t going to build wealth by putting your money into a low-yield savings account, where the most you will get back is 2.5% annually. That is a small amount compared to returns you can receive on investing in stocks and bonds, which is an excellent way to start building up your portfolio.
There isn’t a better time than now to learn all about investing in bonds vs. stocks, even if you feel uneducated about them. You are taking a step in the right direction and grabbing hold of your future now when you can start earning valuable compound interest that will add up to big numbers over time. Just think about what you can do with that money in terms of your retirement, your kids’ college education, a second home, vacations around the world, and much more.
Our stocks and bonds for dummies offer six essential tips you need to keep in mind in order to be successful with your investments.
1. Learn About Stocks
Our first stocks and bonds for dummies tip are to learn the basics about stocks. This may seem like an obvious first step, but education and a basic understanding of the U.S. NASDAQ and how stocks work is critical for inexperienced investors. Before you dive headfirst into the New York Stock Exchange start strategizing around penny stocks vs. preferred stocks vs. common stocks, let’s get the fundamentals down.
Stocks are an equity instrument that carries ownership interest. There is no return guarantee, but you do have voting rights within a company. The stock market is where you will go for a long-term investment, because the longer you hold onto a reliable stock, the more money it’ll make for you, and the more you can work toward reaching your financial goals.
Though there are no guarantees, the stock market is still one of the best places to park your money because it offers a 10% annual yield on average. Despite the expected ups and downs on the stock market, stocks have consistently earned more than investment-grade bonds in the long-term. When compared to bonds, stocks have a higher return; bonds only offer a 3 to 4% return. For example, when looking at bonds vs. stocks, if you had put $100 into the stock market in 1926 when the S&P began tracking the market’s performance, your investment would be worth over $726,000 today. If you had put your money into bond then, you’d only have $10,881 now.
2. Learn About Bonds
Now that you know the basics about stocks, it’s time to understand the fundamentals of bonds so you know how to invest in both stocks and bonds to diversify your financial investment portfolio. Bonds are a debt instrument with a promise to pay back your money with interest. There is a guaranteed return, and you’ll get preferential treatment when your bond matures.
Unlike stocks, bonds are very reliable, always – especially government bonds, which are called treasury bonds. The other types of bonds are corporate bonds and municipal bonds.
The longer you hold onto your bonds, the better because you’ll get higher return rates on your investment. You can choose how long you hold onto the bond. Typically, the time period will be something like one, two, or five years. Bonds will be ranked from the best quality, or AAA to the worst quality, or D. You may also see symbols and numbers that further describe the rating. A junk bond is going to be related below rated below BBB- or Baa3.
You can make money on a bond by either holding onto your bond and receiving the interest when it matures or sells it for a higher price than you purchased it for.
3. Choose Reliable Stocks and Bonds
Our next stocks and bonds for dummies tip are to start by looking into blue-chip stocks to invest in. These are reliable stocks from consistently profitable companies like Apple, Microsoft, Google, and Facebook that will undoubtedly give you a high return, and may even offer you a dividend payment every quarter. If you invest in startups and unproven products (like Bitcoin), you may end up losing everything. That might be OK with an investor with tons of resources, but you can’t afford that kind of bad situation.
The most reliable bonds are government bonds. This is because the government doesn’t default on its loans. It just ends up printing more money. Buying bonds from highly related municipalities and corporations are going to be pretty safe as well. Forget the junk bonds, which are poorly rated, when searching for a solid investment.
4. Save Up Money and Invest in Stocks and Bonds
Now that you know the basics of stocks and bonds for dummies, you can begin saving up for your investments. It only takes $500 to get started on most stock platforms, and you can purchase bonds in $100 increments. However, if you want to make actual money back on your stocks and bonds, you should save up at least $1,000 to start, if not more.
Many blue-chip stocks, for instance, can cost over $1,000 per share alone. You aren’t going to be able to make a real impact on your wealth unless you have at least a few thousand dollars to invest in these stocks. Bonds may be the way to go until you can save up more. One of the reasons people buy bonds vs. stocks is because they don’t have much to spend but still wants to make a little interest. Bonds are a good way to dip your toe into the water before making bigger moves.
Once you’re ready to invest in stocks and bonds, sign up for a platform to purchase them on, like Merill Lynch or Charles Schwab. These platforms are going to charge you to make the purchases, however, they also give you valuable resources where you can learn further information about stocks and bonds for dummies. You can read articles, get access to charts, and perhaps even talk with a financial advisor. Compare each platform’s benefits before making a final call.
5. Follow the News on Stocks and Bonds
To continue your education on stocks and bonds for dummies and learn more about how to invest in stocks and bonds to set yourself up for a strong financial future, make sure you keep up with the news. This includes setting up alerts on your mobile devices and looking at the stock market ticker on a regular basis. Keep an eye on trends and companies you can purchase stocks and bonds from to make a good return.
And, if you want news and advice on stocks and bonds delivered right to your inbox, make sure you sign up for Fast Fortune Club. Tom Gentile is an expert investor in stocks and bonds who runs the Fast Fortune Club newsletter. He’s taught more than 300,000 people how to be financially stable and successful investors. He will show you the steps to take to make smart investments in stocks and bonds, and how to get in on the ground floor of investments nobody has heard about yet… because that’s how you make the real money.
You won’t have to go around searching for advice on stocks and bonds when you sign up for Fast Fortune Club’s Money Calendar Alert. This tool alerts you when there is a good investment in the stock market you need to pounce on as soon as possible. Even if you are investing on a small budget, with Fast Fortune Club and Money Calendar Alert, you can stretch your money farther and make sure that it gives you the returns you deserve.
Just because you’re at the point where you’re looking up stocks and bonds for dummies, it doesn’t mean you can’t become like a Wall Street Pro by educating yourself and following expert advice. All it takes is persistence and dedication to investing, and you can be on your way to a financially stable future in no time.
If you’re ready to learn more about how to invest in stocks and bonds and ensure your investments will work hard for you, sign up for Fast Fortune Club today.