Investing Guide for Small and Young Investors

By MicaR | Online Venture | 3 May 2024


In this article, I will answer some basic questions about investment, such as

When is the Best Time to Invest?

How Much to Invest and How Much to Save?

How a Regular Investment Will Change Your life?

When is the Best Time to Invest?

“The best time to invest was 20 years ago and the second best time to invest is now.”

This is not my original line, I found it on the internet and this is one of my best quotes about investing.

If you missed investing 10-20 years ago because nobody told you to invest or you were too busy enjoying your life, there is nothing to worry about because you can start investing now.

The word investing can be so overwhelming because for someone who has never invested it will be very confusing as they don’t know where to begin.

Watch for the release of security deposits and treasury bills: Government and government agencies frequently release security deposits and treasury bills, which offer a guaranteed return for the minimum investment for one year period.

Watch the stock price: The stock market frequently goes up and down, watch the market, and if you see it has reached rock bottom, start investing.

Keep an Eye on IPO: IPO or Initial Public Offerings are primary shares offered by a company. The share price is very low in IPO. Try buying as much as you can

Home price has gone down: When the property price is down, that’s the right time to invest in real estate.

How Much to Invest and How Much to Save?

If you have the money you should invest because the return on investment is always bigger than the return on your savings. Investing is of course risky, however, considering the fact that you make a lot of gains, your risk is worth taking. However, when you are investing, you need to remember a couple of things.

You should always invest the amount or the market that matches your risk tolerance level.

You should never invest the amount that you cannot afford to lose.

You should diversify your investment by investing in various markets.

Preference should be given to investment; however, this does not mean you should not save. You should of course save money because you will need it for your daily needs as well as for emergency situations. If you invested all your money and if you need money for emergency needs, it will be a big problem. Therefore, you should also be prepared for situations when you need money. However, much money you need for your saving is the big question.

Generally speaking, your savings accounts should have enough money for paying your 3-4 months' bills. For example, if you need $1000 to maintain your lifestyle, you need $3000-$4000 in your savings. You should also save in high-yield saving accounts.

How a Regular Investment Will Change Your life?

Investment is not something like you cook food and it is ready to be served in 15-20 minutes. Investment is something like you planting a seed and waiting for years for the plant to give you fruits and in the meantime, you also continue watering and feeding the plant.

Let’s say you can only spare $50 per month. Instead of depositing this money in your bank account or keeping it in your wallet, invest in the stock market. Continue doing this every month. In one year, you will have $600 in the stock market. Generally speaking, the return on the stock market investment is 12-14 percent on average. By the end of the second year, you will have $1200 worth of investment and 12-14 percent returns on your investment.  When you invest every month, you are not only building your portfolio but you are also earning a return on your investment.

When you are investing, you reinvest your return on your investment (stock dividends), by doing this you will also save money on tax, and in the meantime, you will also compound your income. If possible also increase your monthly investment amount by 10 percent, or $55. In 20 years, you will have a lot of money.

How to Start Investing?

One of the easiest ways to generate income is by investing. When you invest, you also generate passive income, therefore, investing is also considered one of the best methods to build passive income. There are a few disadvantages of investing such as you need a lot of money to start investing, investment does not always yield profit, and there is a lot of risk of losing money. You will also be heavily affected by things like inflation, recession, market crash, etc.

If you have money and if you are willing to take the risk, here are the top 10 markets where you can invest your money.

Real Estate (including your own home or land for personal use)

Saving Accounts

Fixed Deposit Bank Accounts

Bonds and Security of Deposits

Commodities (Energy, Agriculture, and Metals are three major commodities, for example, gold, silver, natural gas, oil, grain, beef, etc.)

Mutual Funds

Stock Market

Start-ups (new businesses)

Cryptocurrencies

Which market do you think will give better yields?

What is the fastest way to get rich?

Here are some options you can explore. I have also shared the pros and cons of these methods.

#1 Start your own company

Pros: You have an option to grow really big by continuing to reinvest your profits.

Cons: There is a lot of work to do, but there is also a huge risk involved.

#2 Invest in other companies or businesses through the stock market or direct investment

Pros: Not only your stock price will increase, you will also earn from dividends.

Cons: If you don’t know about the stock market and don’t know how a business operates, you are ruined

#3 Invest in Mutual Funds

Pros: A fund manager will invest your money in profitable areas and make money for you.

Cons: Mutual Funds are also subject to market risk. They are not full proof.

#4 Put your all money in a fixed deposit

Pros: You can compound your savings and get maximum return.

Cons: The rate of return is small, the maximum you can get is 12 percent per year.

How Not to Get Scammed With Penny Stocks

Imagine, you get a tip that the stocks that cost 10 cents now will soon become 50 cents. You invest $1000. Soon, the stocks become 50 cents, you feel so confident that you now invest $10,000 and hope that the stock will become $1. Sadly, this does not happen and you lose money.

You need to understand Penny Stocks Scams

Penny stocks are stocks from small companies. In the stock market, there are no buyers for these stocks. They are priced very small, something like 10 cents, 20 cents, 50 cents, $1, etc.

More than 80 percent of shares are controlled by 5-6 people. These people spread fake tips in order to encourage people to buy these stocks (just like I mentioned in the first paragraph)

These companies do not have a proper balance sheet. These companies do not have any orders.

While investing, always make sure to check fundamentals and technical, only then you will earn profits.

Never Invest in HYIP or Ponzi Scheme  With Crypto

Whether you have realized it or not, the evolution of cryptocurrencies and the adoption of cryptocurrencies have also highly increased the cases of scams. These days Ponzi schemes, HYIP, and Pyramid Schemes all are using cryptocurrencies, and a lot of people get scammed. The primary reason for this is transactions cannot be reversed.

Some of the common scams offer using cryptocurrencies are:

Mining programs: A lot of mining programs are scams, you pay for hash power through crypto and you lose money.

Investment program: A large number of investment programs are also scams, they are offering high rewards but they do not have any believable system to make as much money s they promise you to pay. One of the biggest examples of these programs is Hyper Fund.

Scam crypto projects: A substantial number of new crypto projects also are scams. They collect money from the investors and then vanish (popularly called rug pull).

Crypto doublers: There are sites that promise you to double your crypto but these are also scams.

How to Identify Your Risk Tolerance 

Money is not the only thing you need when you want to invest, you also need to understand your risk tolerance level. If you start investing money without evaluating your risk tolerance level, you might encounter a huge debt. You might also have to consult a financial advisor before investing, but that is another subject of discussion, here we will talk about how to identify your risk tolerance level but before that, we need to talk about what exactly is risk tolerance level?

Let’s say you invested $1000 in the stock market. If the market crashes or the company you bought goes bankrupt the value of your stock might become zero? What will this mean to you financially?

This is a loss but you can still manage your life

You become broke and you have no way to support your life

It is a loss but with hardship, you can go on.

These three different situations will help you understand your risk tolerance level?

Having a high-risk tolerance level means you can support yourself despite losing your entire life. You will face hardship but you can still go on means you have a moderate risk tolerance level and if you become broke, you have a very low-risk tolerance level. Once you know your risk tolerance level you can start investing accordingly.

How to Diversify Your Investment

Here are some of the basic rules of investment:

Understand your risk tolerance level,

Invest only in the assets that match your risk tolerance level.

Invest only the amount that matches your risk tolerance level.

Never invest the amount that you cannot afford to lose.

Diversify your investment portfolio.

What does it mean to diversify your investment?

Diversifying your investment means putting your investment in different assets and investing in different markets. For example, when you are investing in the stock market, you buy stocks from A, B, C, D, and E companies instead of putting your all money in one of these stocks. Diversifying also means instead of investing only in the stock market, you invest in different markets such as stock market, mutual funds, treasury bills, real estate, equity, or crypto.

What happens when you diversity your investment?

When you diversify your investment, you will minimize your risk. For example, if you lost money in A  and B stocks, you still have C, D, and E to make you profits and recover your loss. If you lost money in the stock market you still have mutual funds or real estate to recover your losses, and even make profits for you.

How to diversify your investment?

Do the research and identify less risky markets and divide your money between these markets.

Three Investment Rules You Should Know Of

If you want to start investing or if you have already started investing, here are the three investment rules that you should know of and even better if you start following these rules

The 100 - X Rule: Imagine your age is X. The number you get by subtracting your age from 100 should be your total investment in stocks or equity. Let's say you are 30 years old, when you deduct 30 from 100, you get 70. Your total investment portfolio on equity and stock should be 70 percent of your investment. If you have a $1000 investment, $700 should be in stocks or equity and the remaining 30 percent on other markets.

Rule of 72: Whatever returns you are receiving from your investment and if you divide 72 with that number, you will know when your investment portfolio will double. Let’s say your rate of return is 10 percent, and when you divide 72 by 10, you will get 7.2. Your investment will double in 7.2 years. While this is not the exact number when your investment will double, it is almost near that figure.

40 Percent Rule:  Whatever you earn in a month, the money you spend on debt repayment should not cross the 40 percent mark. If you make $1000 per month, your debt repayment should never be more than $400.

How to Start Investing Online

Before I can give any investment advice, I would like to know about your knowledge, skills, expertise, and investment funds. If you have just $100, it is not possible to invest offline, where do you think you can put this money. However, with $100 you can invest online. You can start trading penny stocks or invest in cryptocurrency or build your own website and make money in various ways. However, if you want to invest online you need digital marketing skills, if you do not have digital marketing; it is really difficult to succeed online.

How to Start Investing for Financial Freedom

Do you know what the primary purpose of education is?

Education actually is an investment. When you go to school, college, and university, you are actually investing in yourself to build knowledge, skills, and expertise. Once you are out of the university, your investment will start giving you dividends in the form of a job or employment.

You might have not been able to get good education due to various circumstances. You can still enroll in a course. When it comes to learning something, age is not the limit. Recently, the world’s oldest blogger died at the age of 101, she learned blogging at the age of 90 and was an active blogger until she died.

The first stage: Invest time and money to learn something that will generate high income in the future.

The second stage: Use your knowledge and skills to build an income, if possible learn another skill to increase your income

The third stage: Invest your income to make more money.

Investing Dos and Don'ts

If you are investing in the stock market you can do two types of investment, one, short-term investment, and two, long-term investment. Short-term investment is you sell your stocks as soon as you see some profits. If you have bought a lot of stocks, you can make good profits even when there is a slight improvement in the market. A long-term investment is you buy stocks and hold your stocks for the long term. This method will be profitable even when you have invested a small amount. However, long-term investment will make you profits only when you have invested in profitable companies.

Real Estate is a profitable investment, sadly, this investment is not available for a lot of people as you need a lot of money to invest in real estate. For example, you can start a profitable business with $10,000 but when it comes to investing in real estate property, $10,000 has no value as you cannot invest in real estate with this money.

I think a long-term investment is a better strategy. However, you need to be financially capable to hold your investment for the long term and never panic sell.

Legit Online Investment Opportunities

There are a lot of investment apps that are completely legit and you can make money by investing through these apps. Here are the apps that I have used and the apps that I know are legit. 

Binance: Binance is a crypto exchange app. It is available in over 140 countries. In order to use this app, you will have to first deposit fiat money and buy cryptocurrencies or fund your accounts through cryptocurrencies. Once you have cryptos on your account, you can hold your cryptos for the price to improve and then sell when the price is high enough for you to make profits. In the meantime, you can also stake cryptos and make extra money.

Robinhood: THis is an investing app that will allow you to invest in American stocks like Tesla, Apple, etc. as well as various crypto. You can either hold for a longer period or trade frequently to make money

eToro: THis app is just like Robinhood, you can invest or trade stocks as well as various cryptos.

Webull: This is another investment app that will allow you to invest in stocks and cryptos. 

Coinbase: This is a crypto investment and trading platform.

Investing in Start-ups

Investing in a start-up means you are investing in a completely new business. The idea or the product is never tested and no one knows for sure whether the business will succeed or not. Therefore, there is a lot of risk in investing in start-ups. However, investing in a start-up also means you are able to get hands-on with a lot of equity for a small investment. While $1000 is nothing when you want to invest in the established market (with this money you can not even buy one-tesla share), this can be a really big amount for a start-up. If the paid-up capital of the start-up company is $2000, with your $1000 investment, you have a 50 percent share in the start-up. If your investment did not go well, you will lose $1000, but what if it became profitable? You might be able to build a fortune with this $1000. Imagine the start-up comes with really interesting products and sells like hot cake in the market, or what if big businesses buy the company for a lot of money. Instagram was sold for $1. It was created by Kevin Systromand was funded by Baseline Ventures and Andreessen. Imagine how much money they made by investing in Instagram when it was just an idea.

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MicaR
MicaR

Web Designer and Content Creator


Online Venture
Online Venture

A blog on Business, Finance, and Making Money Online. The blog offers useful and interesting articles on how to start and run a business and how to make money online.

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