Investing money can be exciting, but also daunting, especially if it’s your first time. There are a number of ways you can invest your cash in the hope you’ll get decent returns, all which come with different conditions and considerations. You might want to buy shares in the stock market, purchase premium bonds, put money into property – whatever method you choose for your investment, there are the same initial considerations that you should take into account.

So, where do you start? We’ve listed six steps for you to follow when you choose to start investing.

1.Determine if you’re ready

Before you start investing, it’s important that you make sure you’re actually in a position to do so in the first place. Do you have any debts or outstanding payments? Always clear all your debts first, so that you are in the best position possible. Ideally, you’ll have a lump sum set aside to invest with – it’s never a good idea to use all your money at once when investing. If you’re satisfied that you’ve got a decent amount to invest, as well as an adequate amount in an account to keep you going should your investment fail, then you’re ready to start the process.

2.Have back-up funds

Always have an emergency fund set aside, preferably in an easily accessible account, if you’re going to be investing any money. Not only can this be used as a buffer should your investment fail, it will provide you with a back-up for any emergencies that crop up. Life can throw unfortunate curve-balls when you’re least expecting it, so you need to be prepared just in case. Ideally, you should aim to have at least a few months of living expenses in your emergency fund and promise yourself not to dip into it unless absolutely necessary.  Even if you never have to use your emergency account, you’ll at least have peace of mind that you’ve got something to fall back on.

3.Download an app

Organising your investments can be overwhelming and time-consuming, especially if you have more than one type of account. It’s therefore a good idea to consider tracking your investments with an app. There are a number of investment apps, many of which are free to download and use. Having all your investments organised within an app will streamline the investment process for you and enable you to monitor and track everything more efficiently. Many of these apps offer useful financial advice and can help you to assess the risks associated with each investment. Whether you’re a first-time investor, a professional, a day trader, or just looking to use the best budgeting tools, there is an investment tracking app for you.

4.Decide how to invest

As there are so many methods in which to invest your money, it’s important that you do your research in order to establish what type of investment is best for you, not what seems the most attractive. For instance, just because your friend did well from buying and developing property doesn’t mean you will too – can you afford the time and expenses to renovate an entire property into a sellable asset? Do you have the relevant skills and contacts to do so? Perhaps you want to invest in the hope it might secure your funds years in the future, say for your retirement. If that’s the case, then perhaps something where your cash is locked away – such as in a government premium bond or high yield savings account – is a more suitable option for you. Take a serious look at your situation and consider what time and costs you’re able and willing to give before you decide how to invest.

5.Start small

Once you’ve decided how to invest your money, it’s a good idea to start small. Investing money for the first time can be daunting, so it’s a good idea to start by just dipping your toe in the water in order to get a feel for the market. That way, you can pull out early if anything goes wrong and you’ll avoid losing too much. This is especially important if you’re investing in the stock market and you don’t want to risk losing a lump sum of money. Likewise, if you’re investing in property, then buying a small apartment to develop and gradually building up to larger properties is a better idea than just jumping into one massive project with all your funds. If this is your first experience with the stock market, try investing a small amount each month to get you on track, then increase it over time if you wish. You could start by contributing £20 every month – although some providers will accept as little as £1 at a time. By investing small amounts on a regular basis, it will help you to familiarise yourself with the trends in the market and allow you to take advantage of any highs and lows; for instance, you can buy up several shares when the stock market is performing poorly and prices are lower.

6.Understand the risks

It’s all very well having the relevant funds to invest and to fall back on, but you need to make sure that you understand the risks involved. Generally speaking, the longer you can have funds locked away, then the more risk you should be able to take while seeking higher returns, but this is not always the case. All investments carry some amount of risk, and the value and income you receive from them can fluctuate depending on a whole range of factors. There might also be extra charges attached to some investments, which can really impact on your returns. That is why it is so important that you do your research beforehand. Ideally, try to use providers that either charge a fixed fee or a one-off percentage on your investment.

Conclusion

Choosing to invest money is a big decision. However, as long as you follow the necessary steps, you should be able to invest with confidence.

The objective of investments is to have a place to park some of your money, minimize your exposure, and make more money over time. In order to succeed at investing, you need to understand that it is part risk and part lucky planning. Risk is always associated with investing and is often the first significant barrier people have in deciding whether to get involved with investments or not.

But with proper research and planning, you can minimize the potential for catastrophic losses before you even invest a dime. People are often fearful of investing because they don’t understand the foundations and risks that can affect investment opportunities in the first place. One of the things people do is inflate their understanding of investments which leads to added risk, take on too many investments, which leads to added exposure, or act out of fear due to momentary market fluctuations.

So what is a person to do? First, you can hire a financial expert to help guide you. Then, you can take on risks by investing without really understanding the values and fluctuations of the market, or you can look for more long-term, more secure investment opportunities such as investing in real estate. No doubt, one of the safer, long-term strategies for investment is to buy real estate.

Types Of Income Opportunities In Real Estate

In order to make money in real estate, there are three primary ways.

• Purchase to Sell: With a purchase to sell, you’re buying the property to sell whether you invest money for renovations or sell as-is. The benefit of purchasing a home to sell is that you can make some decent cash, especially in a seller’s market. The downside is that you can take a significant capital gains tax by doing so.
• Purchase and Hold: With a buy and hold strategy, purchasers have a few different options. One is to buy the home, live in it, and sell it much later in time as you pay down the mortgage and increase equity. The second option is to buy the property with the intent to make rental income over time. The risk here is if you have any layovers between renters, something significant happens that causes loss of revenue, or you can’t charge enough rent to cover your mortgage.
• Real Estate Investment Trusts: With a Real Estate Investment Trust, or REIT, you join forces with several other investors to purchase Real Estate. The bonus of this strategy is you can buy more Real Estate than you might as an individual and lower your risk along the way. The negative is that you only own a small share of the investment rather than entirely making your profits smaller.

As an individual looking to make money off small townhome investments, a good strategy may be the buy and hold method but with a tiny change. For example, instead of buying a single-detached home and renting it out, consider buying condos or apartments and renting those out instead.

The benefits of buying a condo or apartment versus a home are that the costs are typically lower. In addition, you have the Homeowners Association that will take on some of the day-to-day maintenance of the property outside the condo. As an entry to rental ownership, these may be an excellent first step to consider.

However, if buying to hold and rent out your property is the goal, then finding a centrally located place is ideal. Other considerations are that it has an excellent rental occupancy rate, access to major industries, and is affordable enough that you can charge more in rents than your mortgage are all factors to look for in your search.

For detached, single-family homes, you can look to the suburbs of major metropolitan areas that offer some of the keys we discussed earlier. For example, houses for sale in Moreno Valley provide you with an area of population growth outside of a central metropolitan area (Los Angeles) and stable occupancy rates.

By considering purchasing a rental property in a suburb surrounded by a large population density, such as Moreno Valley, you’re going to have increased demand for rental units while having lower inventory available, further driving the rental market upward and making you more income over time.