Good Investments for Young People

Knowing about good investments is very important in this age of uncertainty. For young adults, who have just started their career and are looking out for reliable investments, this article provides all the necessary information.
Economic savings are the need of the hour. Everybody wants to save enough, so that retirement is not difficult and even today can be stress free. For young adults, it is advised that investment planning should commence after graduation or as soon as one gets a job. Young adults have a leverage that they seldom realize. As their career has just begun, different investments can be tried out as they have ample time to correct a wrong one. Here are some of the best investments that young adults can consider.

Gold ETF

  • GOLD PRICE ETF: A gold price ETF uses investors money to buy physical gold and store it. After storage, they distribute this gold in shares (ETFs) based on the current market price. When an investor purchases an ETF, he/she is actually purchasing gold in the form of stock. Their value is directly linked to the market value of gold. If the value of gold increases by 10%, the value of the ETF also increases by 10%.
  • GOLD STOCK ETF: Investing in a gold stock ETF means investing capital in gold mining companies. The value of these ETFs depend on how well the companies perform and not on the current value of the metal.

If storing physical gold seems a tedious task, then buying gold ETFs (Exchange Traded Fund) is the closest an investor can get to the yellow metal. ETFs help invest in gold through stock market. The market offers two types of gold ETFs: Gold Stock ETF or Gold Price ETF. The gold stock ETF is linked to companies involved in gold mining and gold price ETF means investing directly in the gold price index. The biggest advantage of investing in gold ETFs is eliminating the stress that comes with the owning of physical gold. Trading in ETFs is pretty easy as they can be bought or sold in minutes online. This is easier than trading physical gold.

Term Deposits

Capital in term deposits can be deposited for short and long terms. The minimum period for a short term deposit is 12 months and for long term is 18 months. Before opting for this investment, check which banks or financial institutions provide the best interest rates.

Another great option to diversify a portfolio is by opting for term deposits. Investors have to set aside a certain amount and lock it for a fixed term. At the end of the term, the money with the interest earned can be withdrawn. The biggest downside of this investment is the locking period of the capital. Money can be withdrawn in case of emergencies but that doesn't benefit the investor.

401 (k)

The amount set aside for 401 (k) is deducted from the salary before the amount becomes eligible for taxation. This minimizes the tax, as it is only charged on the remaining amount.

Your career has just started and retirement is almost 40 years down the road. Even so, it is essential that the 401 (k) should be taken seriously. Research says, in the coming ten years the average American won't be able to depend to Social Security alone, and it is essential that their hard-earned money is channeled in various saving tools such as 401 (k) for a secure future. To ensure that the 401 (k) works for you, it is essential to be employed by a company that sponsors such an investment for its workers. Currently, the annual contribution to the 401 (k) is $17,000.

Stocks

Play small initially by buying just 10 to 50 stocks, understand how the market and rates fluctuates. Another important virtue to always have is self-control. Anyone who has mastered self-control seldom makes a bad decision in stocks.

The stock market is considered the most unstable form of investment, yet many management and financial gurus advise investing in it. People are scared of investing in stocks because they are not aware about its functioning. Young adults shouldn't just purchase any high-performing stock. Just because a company is making a billion dollars today, doesn't mean that it won't be filing for bankruptcy tomorrow. Before buying stocks, an in-depth analysis is advised. Even the 'Oracle of Omaha', Warren Buffet writes down reasons for buying a particular stock before he invests in it.

Mutual Funds

Tax-free mutual funds might sound appealing but there are certain points to know before investing in them. These funds are issued by local and state governments and hence are free from federal, local or state taxes. However, interest and profit earned will be minimal in comparison to investments from other type of mutual funds.

Mutual funds are always considered reliable due to the low amount of risk they carry. The working principle of a mutual fund is extremely simple: An investment company gathers capital from potential investors and purchases financial assets or invests in government related schemes. The best part about mutual funds is that they require minimum investment as the costs of buying and selling the assets is shared by thousands. Mutual funds are usually preferred by investors, as the investment is done under the expert guidance of a fund manager whose paycheck depends on how well the fund performs.

Real Estate

First time buyers should keep a tab of the recent developments happening in areas where they are planning to invest, necessary information can be obtained at the Chamber of Commerce. A new buyer should thoroughly investigate the location of his/her property.

Experts believe that now is the right time for putting money in real estate. But before pulling the trigger, it is essential to have the basic understanding about it. Real estate is just not trading capital and buying properties. Even the simplest transaction in real estate could take weeks or even months depending on market conditions and the location of the property. First time buyers should start with condominiums or a duplex and investing in large apartments or office spaces should be off limits till the buyer knows everything about real-estate.

Roth IRA

Most people opt for either IRA or 401 (k) but experts recommend investing in both because it provides tax flexibility in retirement.

The Roth IRA (Individual Retirement Agreement) was established in 1997 to help US citizens enjoy a stress free retirement. Contributions made to the IRA are considered 'tax-free' and cannot be deducted from tax returns. This means when you plan to withdraw money from the account, there would be no taxes on the growth of the account. This means huge amounts of money saved if the investor is in a high-tax bracket. In 2001, the annual contribution amount was increased from $3000 to $4000 and in 2008 it again increased to $5000.

Investing while you're young is a great way to ensure a better future. There are various types of investments available in the market and it becomes really hard to pick one and call it the best. Potential investors can invest in anything they want to, the important thing to understand are the pros and cons of their decision.
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