If you are a novice investor, you should never try to time the market. This means it is always a good time to start investing. In this article, we will show you how to start investing money, apps you can use and why custodial accounts for kids like app Flyte are popular!
The Best Investments in 2023
Where to invest money in 2023? The best investments in 2023 remain stock ETFs. It is wise to diversify your holdings to avoid being overexposed to any particular industry. Buying a basket of stock ETFs or simply buying an S&P 500 ETF is a safe plan. However, be prepared for short-term volatility.
You should also hedge your stock holdings by purchasing T-bills that offer a significant yield and can be quickly sold and used to buy ETFs at amazing prices in the event of a stock market collapse. A portfolio weighting of 65% stock ETFs and 35% T-bills is a solid strategy in the current market.
Saving vs. Investing
Saving is the act of accumulating cash and then storing said cash. What is investing? Investing is the act of taking cash and deploying it in different ways in hopes of earning a return. For example, taking $200 a month from your paycheck and putting it in a bank account is saving. Whereas taking that same $200 a month and using it to buy stocks is investing.
Investing is an effective way to preserve and grow your capital. Whereas, saving and just keeping the money in a bank account will actually cost you money due to inflation. If you save $100 and there is 5% inflation, then next year, that same $100 bill is worth only $95 in terms of the number of things you can buy. For example, this year, you could buy 20 $5 widgets, but now they have increased in price by 5%, and you can only buy 19.
Now, if you take that $100 and place it in the stock market and get a return of 10%, you now have $110, which minus the 5% inflation, has a purchasing power of $104.5. As you can see, to stop your savings from constantly losing purchasing power, you need to invest!
Why is Saving Money Important
Saving money is incredibly important because it allows you to live comfortably, knowing that unexpected expenses won’t place a financial strain on your family. Saving also ensures you can help your children and give them a head start in life. Instead of wasting money now, you can save for 20 years and then be able to pay for your kid’s college or pay for their down payment on their first home.
Saving sounds simple, but it actually takes quite a lot of discipline. It can be difficult to avoid wasting money and letting your expenses spiral out of control. To ensure you save, you need to create specific goals relating to your savings account, create a budget that allows you to save your desired amount, and involve your whole family to keep each other accountable.
Save Money for Kids
The best way to save money for kids is to create a custodial account for them. This is an account that you control, which is then transferred to your child when they turn 18 years old. The best app to invest in stocks is Flyte which lets you invest in thousands of stocks and ETFs for free. They also provide your child with a debit card, which you can control and set limits. Flyte is an amazing platform to teach your child about finance and help them build wealth early!
Best Savings Account for Kids College
The best savings account for paying for college is a Coverdell savings account. A Coverdell savings account is a type of custodial account which allows you to save and invest money for your child’s college expenses. The money is not subject to any taxes as long as it is used to fund college expenses. The maximum you can contribute to a Coverdell ESA is $2000 per year.
Different Investment Options
Using an investing app, your options are nearly endless. At the click of a button, you can get exposure to real estate, stocks, commodities, bonds, and crypto, yes, crypto custodial accounts exist! If you are new to investing apps and are looking for safe investments for minors, then it makes sense to stick to broad stock ETFs and investment-grade bonds.
Choose a Strategy that You Can Follow
You want to choose the least complicated investing strategy possible. The more complicated your strategy is, the more likely you are to make mistakes and the more hours you have to dedicate to it.
One of the simplest strategies is to dollar-cost average, which involves investing fixed amounts of money regularly, irrespective of the stock price. For example, you might buy $100 worth of an S&P 500 ETF every month for 20 years. With this strategy, you don’t have to conduct any in-depth analysis or consult any charts. Simply keep buying and compounding your returns until you reach enough money to meet your financial goals.
Tips for Investing During Uncertain Times
Stop wondering whether is it a good time to invest and instead start dollar cost averaging today! It doesn’t matter what the current market conditions are if you have a 20-year time horizon. Just imagine if someone talked you out of investing in Google or Amazon 20 years ago just because the economy was shaky.
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