If you have been thinking about growing your savings, then you have at least considered getting into investing. Without a working knowledge of how the stock market works or why the cryptocurrency is the hottest new investment vehicle, you probably won’t know where is safest to put your money. The reality is that some types of investments are safer than others. In order to identify them, first, you’ve got to understand what investment options you have and how they all work. Here are the smartest ways to invest your money so that it will grow safely.
How Long Do You Have to Invest?
Some of the things that you should cover while preparing to invest include how much money you have to invest and how much you hope to have in your bank account by the end. For instance, people who begin saving and investing towards their retirement plans might plan on working towards their goal for a total of 30 years. If you are investing your money because you want to save up a big down payment on your first home, you may have a much more conservative time frame of 2 to 3 years to work with. Those with longer to invest have more incentive to look at investment options that are more stable, yet also come with fewer gains. By contrast, if you have a shorter window to invest, then you are going to consider more aggressive investment options.
How Much Do You Plan to Have Saved?
In determining how much you hope to get from investing, it is imperative to estimate what your total initial investment will be. You could start with $1,000, and plan to invest another $100 a month. Other smart investors might have larger initial investments and not plan on making any recurring investments. The amount that you have saved up right now for investment purposes will also impact how safely you can grow your money over time.
Learning About the Different Financial Markets
Did you know that there are many, many different ways that you can start investing your money, as soon as today? Of course, just because there are various investment options available at your fingertips, doesn’t mean that you should throw your money into any of them arbitrarily. There are RRSP and Tax-Free Savings accounts that you can invest in if you are thinking about retirement. For investors who want a little more freedom to deposit and withdraw their money without negative tax implications, investing in cryptocurrency or even stocks could be much more attractive.
Choosing the Types of Investment Accounts You Want to Work With
Ask yourself this before choosing an investment vehicle; what is the purpose of investing? If you have a good job, an existing retirement account, and you just want to invest to make a little money on the side, then your version of a smart investment will likely be one that yields a larger ROI. For freelancers or anyone who might be looking towards securing their future, the goal will likely be to secure their initial investments and grow them more slowly over time. This is the time that you want to look for useful resources like Wealthsimple and learn about low-stress investment options. With Wealthsimple, anyone who wants to start investing can get started immediately, even if they don’t know much about finance. Set up an account with them and your investment contributions can be automatically deducted from your paycheque. This takes the worry out of investing while also enabling you to get started on your journey to financial freedom sooner. If you want to learn more, check this article that explains, ‘what is an ETF?’
Online Brokerages and Exchanges
If you have an account with a brokerage, then you can do a lot of investing on your own. With the advent of online brokerage accounts, novice investors have a large suite of tools and investment options that have made investing a lot easier than in years past. You can trade currency yourself, or trade Bitcoin for Dogecoin. Online brokerages and exchanges let you make transactions from your electronic devices securely and instantaneously. The only downside is that you really must know what you are doing if you are hoping for sizable profits.
Digital Cryptocurrency Accounts and Wallets
Bitcoin may be the most well-known cryptocurrency, but there are dozens of other options that also exist. Cryptocurrency fluctuates in price much like the stock market, and there are no limits on the amount that you can own. You can use cryptocurrency much like you do cash, either to buy goods and services, or to invest for the long-term. While you can buy cryptocurrency within any online exchange, you have to go a step further and keep it safe within a wallet. This is because cryptocurrency is not ensured by any entity, unlike the TSX.
Forex and International Investment Options
Another way to safely invest your money is by getting involved with options like the forex market. Forex is the act of buying and selling foreign currency. You need to accurately predict whether the value of a currency is going to go up or down. You can increase your odds of making more money by leveraging, but you will also be at risk of losing more of your investment, too.
Day Trading Versus Swing Trading
You can use just about any online brokerage to purchase stocks. However, what do you do with them once you have them? You can hold onto them for some time, checking the price as it fluctuates when the markets are open. Selling your newly gained stocks soon after they go up in price is a guaranteed way to make money, but everything that you make will not be part of your take home profits. Any experienced investor will tell you that many of those who actively buy stocks either day or swing trade. Swing trading is electing to hold onto stocks for a shorter period of time, usually only a few days to a couple of weeks. Day trading is exactly that – opening and closing on a stock within the same day.
Looking at Long-Term Investment Vehicles
Safe investments are almost always the ones that you lock yourself into for a longer duration. For example, investing in a company like Apple is smart because they are expected to become larger and more successful long into the future. By comparison, a newer, smaller company that is newly listed on the stock market could have an initial public offering (IPO) that would potentially make you rich, but you would have a shorter window to buy and sell. Considering all long-term investment options will always be considered the safest bet.
Calculating Interest Rates Versus Inflation
Some people wonder if investing is truly worth it. One way to know if your investments are actually profitable is to lay it all out and do the math. First, you have to consider that inflation can make the value of any money that you have saved decreased if you aren’t actively investing it. A loaf of bread may cost $1.50 today, but it could cost you $2.25 in a couple of years. Inflation determines the amount of buying power you have at any given time. If your investments are increasing in value over inflation rates, then you are definitely choosing the smartest and safest investment vehicles available.
Investments and Taxation Rules
Whenever you make money by investing it, you can expect to pay taxes on your capital gains. The good new is that tax rules in Canada will enable you to hold onto the majority of any profits you get from your investments. Some investors actually form businesses in order to deduct their losses and pay taxes only on their gains after all applicable write-offs have been calculated. So, when it is time to file your taxes, remember that you have to report all of your investment activities as well as your total profits to the government.
Knowing How to Grow Your Cash Safely
You could just leave your money in a bank account that has a decent interest rate if you want to be certain that your savings will be kept fully secure. With all investments come some kind of risk. If you were to buy real estate or even become a partner with an existing company, you’d stand to gain or lose money. If you want to know how to grow your savings safely while actively investing in various financial markets, start learning how they work. Pay attention to your investments and read up on the latest news concerning the companies you have invested in. Gain knowledge in the area of financial markets and current international news events.
The first rule of safe investing is to only spend what you can honestly afford to lose. Don’t take money out of existing retirement accounts to embark on a new investment journey. Instead, look at your discretionary spending and saving habits, and find an amount that you truly would not miss if it went missing every month. Start buying small amounts of cryptocurrency, or get started buying shares of companies that have historically performed well. Investments typically don’t grow overnight, but you will see growth as you continue going on with your everyday life as usual.