Let’s be honest: Investing can be kind of scary.
The stock market itself is difficult to understand — you earn money by spending money? And it’s not even necessarily real money, but this virtual number that moves and shifts on a moment-to-moment basis?
Seriously, who thinks this is a good idea?
Well, as it turns out, just about every single financial professional — as well as the army of everyday people who’ve used the power of compound interest to fund major financial goals, like home ownership and retirement.
There’s a reason a 401(k) account is one of the most common workplace perks: You pretty much need to invest if you’re going to build a big enough nest egg to one day throw in the towel.
Investing is also one of the easiest ways to earn passive income—that is, making money without putting in any extra hours at work. Once you set up your investment portfolio, it takes relatively little management to see significant returns: The average investor has seen 10% growth annually over the last hundred years.
So what’s the best way to get started with your own investments? And what do you need to know before you take the big leap? Is it actually possible to start an investment portfolio from a smartphone app, and should you?
Hang on tight, Penny Hoarders. We’re going to dive into all of that and more.
Getting Started: What Is Investing?
Before we dig into the nitty-gritty of how to get started on your own investments, let’s clarify some basic terms.
Investing is spending money on something—be it a share of a company on the stock market, a house, or a painting—in the hopes that its value will grow. If it does, the investor can later sell the item, also referred to as an asset, and earn a profit.
There are four main types of investments, which are also referred to as asset classes.
Stocks, otherwise known as equity investments
Fixed-income investments, like bonds
Money market or cash equivalent…