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Posted by Hannah Tishkoff (MONEY FORUMS: 5, Answers: 1)
Asked on November 2, 2015 10:28 am
Thanks for that answer Peter....I was going to suggest a market index fund to start once establishing emergency savings.
Great question! Equity investments in business or property have been the two best performing asset classes across the last 100 years. Undoubtedly investments in business and property have made many people wealthy. To start out you do not need to open a business or purchase a property. You can start small. Businesses are owned by stockholders; when you purchase a stock you become one of the owners of that business - along with many other investors. To reduce the risk of investing in an individual stock you can invest into a mutual fund. A mutual fund has a pool of investments from individual investors, managed by a professional manager, and geared towards a specific objective. Many funds allow you to invest by committing a minimum monthly dollar amount, so you don't necessarily have to come up with a big up-front amount. Index funds, which attempt to mirror the performance of a specific market index, are a great way to start. A similar type of investment exists for real estate property. These are real estate investment trusts (REITs). Many REITs are traded just like stocks, allowing you to be a property owner without having to worry about burst pipes or late rents. For any investment into these equity investments the investment should be for a long-term goal. It is not a good idea to have your emergency fund subject to market fluctuations! As far as when to start, it is simply as soon as you reasonably can. That means once you have built your emergency fund and can earmark investment funds in your monthly budget. Owning your own business or investment property can be great - but it is not for everyone - and has more risk than investing into a pool of businesses or properties. Do your homework and if you have more questions ask them here. Have fun with it!