The 7 Best Investments For Beginners

The best investments for beginners are easy to find; you just have to know where to look.

Investing can be intimidating and risky. And if you don’t know what you’re doing, you and your money will soon part ways. 

If you’re a beginner in the investing world and want to move your money that’s been sitting in a savings account earning very little interest, you have come to the right place. This article is intended to help you choose among the best investments for beginners, so you can grow your money while minimizing risks.

Best Investments For Beginners: an overview

The best investments for beginners are out there. They offer an opportunity to make more money comparing to a regular savings account.

While these investments can make you wealthy, they can be risky. If you have the stomach to take some risks, then keep reading.

Are These Investments For You?

Given that the best investments for beginners are very competitive, they may be a good choice for you.

So you should consider them if:

• You’re a beginner or a small investor;
• You’re looking for an investment that provide higher yields than banks savings accounts;
• You have put aside several thousands in an emergency funds.

Whatever your situation might be, it’s a good idea to start invest right now. The sooner you start investing, the sooner your money will grow. Don’t wait until the next year or when you have more money. 

What Are The Best Investments For Beginners

Banks, brokerage firms, financial advisors — all out there to get your money. However, there are types of investments for beginners to choose from: mutual funds, stocks, bonds, real estate, certificate of deposits.

We will discuss each one. By the time you’re done with this article, you’ll be comfortable choosing the investments that suit your the best.

1. Money Market Funds – Safest and Best Investments For Beginners

A money market fund is a type of mutual fund.

Mutual funds companies such as Vanguard offer money market funds. Money market fund is not insured by the government, so there is a possibility you can lose money. However, they are quite safe.

They’re safe, because they have a dollar invested in securities for every dollar you deposit in your fund. The principal money you invested does not change in value. When you invest in a money market fund, you earn dividends. That’s a good advantage.

Another advantage of a money market fund as a short term investment is that it provides higher yield than bank savings account. It also allows you to write checks without incurring any charges. So, if you’re saving money for a home that you’re going to buy soon, a money market fund is a safe place to grow your money.

2. Certificate of Deposit (CDs) – Best Investments for Beginners.

CDs are certificates that banks or credit unions sell to you. Banks issue them to you for a specific dollar amount for a specific length of time. The time period could be anywhere from 1, 6, 12 or 24 months to several years.

The bank pays you some interest. You get your full principal back plus interest you earn once the CD matures or “comes due.” If you want your money back before it matures, you can withdraw it. But you will get hit with a penalty for early withdrawal.

Certificate of deposits just like bank savings accounts are very safe. That is because they are FDIC insured for up to $250,000. So, if you’re looking for safety for your cash and competitive yield, CDs are some of the best short term investments to consider.

3. Best Investments for Beginners – Short term corporate Bonds 

Bonds, in general, are similar to CDs. An exception is that they, just as stocks, are securities that trade in the market. So, they may fluctuate in value, but not as much as stocks. Bond funds are a collection of bonds from companies (large, medium, or small) from different industries.

Hence, the name “corporate bond funds.” Investing in bond funds can be used as a short-term investment. Sometimes, investors consider corporate bond funds to diversify their investment portfolio.

Just like a money market fund, corporate bond funds are not FDIC insured. But they are just as safe as a money market fund. Plus, you don’t just invest in one bond or two bonds. If one bond in your investment fund takes a hit, it only affects a small amount of your money.

So while they are riskier than money market funds saving accounts, CDs, short term corporate bonds pay you more. That makes them one of the best short-term investments out there.

4. Treasury bonds – Best Investments for Beginners

One of the best ways to invest money in the short term is to buy treasury bonds. Treasury bonds are issued by the U.S. government.

There are three types: treasury bills, treasury notes, and treasury bonds. They are like CDs. Once the bond matures, you get the full money invested, plus interest. Treasury bonds may provide the same or a better interest rate than CDs. But a big advantage is that, while they’re not FDIC insured, they are backed by the U.S. government.

In other words, the government promises to repay your money, which is considered to be very safe. So if you have more than $250,000, you should consider a treasury bond. Another advantage is that while interest on a CD is fully taxable, Treasury’s interest is state-tax-free.

5. Mutual Funds Are Some of The Best Investments for Beginners

A mutual fund is an investment vehicle in which investors, like you and me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds. In addition, mutual funds are cost efficient. They offer diversification to your portfolio.

They have low minimum investment requirements. Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money. One thing to be aware, however, is that mutual funds invest in stocks and bongs.

These securities tend to be volatile. Therefore, you might lose some or most of your investment if the market goes down. So, beginner investors wishing to invest in these Vanguard Funds should also consider learning how the stock market works.

6. Index Funds – Best Investments for Beginners

Index funds, unlike mutual funds, are passive. That means they are managed by a computer and not actively managed by a fund manager. Index funds seek to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index.

Index funds don’t jump around; they stayed invested in the market. Just like mutual funds, you can buy index funds through fund companies like Vanguard and Fidelity. They also have low-cost, which is usually less than 1% annually. This lower operating expenses help boost your returns. 

7. Real Estate – Best Investments for Beginners

Investing in real estate is not only one of the best investments for beginners. It’s also one of the ways to get rich. Some of the rich people made their billions by investing in real estate. With this type of investment, the sky is the limit on how much you can make.

As a beginner, focus on buying several multifamily units rather than one single-family home.

Speak With A Financial Advisor

If you have questions beyond Vanguard CD rates, you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.