How to Start Investing: Your Guide to the Best Strategies & Apps to Invest Money

By: Dannie Phan | August 31st, 2020

If there’s anything the coronavirus pandemic has taught us it’s to expect the unexpected. Managing one’s funds well is now more important than ever, which is why this might be the perfect time to start investing. Don’t be scared by complicated personal finance lingo and investment advice. Today, we’re here to help you understand the best ways to invest money in 2020. If you’ve ever wanted to build a killer investment portfolio and nail the best investments, you have to stick around to find out how.

How Can I Make Money Through Investing?

Investing is an intimidating word, but it works in a simple way. You use your money to buy things that will, hopefully, bring you greater returns in the future. This means you can potentially double or triple your money—if you invest it wisely.

There are tons of different investment options, but they usually fall under five asset classes: shares, bonds, property, commodities, and cash.

Most investors make their fortune through one (or more) of these ways:

Cashing in money regularly from well-performing businesses and real estate (e.g. on a rental property)
Collecting interest and dividends from savings, stocks, and bonds
Reaping the benefits of an outstanding stock market portfolio and other assets

Understanding Risk and Reward

As you probably already know, higher-risk investments bring you higher returns. You can make a lot of money on them; however, if things go sideways, there’s a good chance you’ll lose a big chunk of it.

Lower-risk investments are much better for small investors who are just starting out. They’re worth it despite carrying a lower payout. Moreover, you stand less of a chance of endangering your cash flow and personal finance.

While there’s no such thing as “risk-free,” some investments are much safer than others. FDIC-insured financial products, for example, are the safest choice for beginning investors. They’re backed by the US government, meaning you won’t lose your money.

Why Should I Invest My Money?

Despite there being risks, it’s still a good idea to start investing. Here are a few reasons why:

You’ll get higher yields than if you were to leave your money in a savings account with lousy interest rates
Investing lets you build wealth to enjoy in the future, like a retirement fund
You can bulk up your emergency fund

Short-Term or Long-Term Investments?

Think about how long you want to invest your money. When do you want to see your gains?

If you want to cash out and enjoy the fruits of your investments within the next five years, take the short-term approach. There are plenty of opportunities. You’ll be able to get a great payout and see if investment truly is for you.

But if you’re in no rush to see your profits, long-term investment is the way to go. Enjoy your higher yields and build a stable future for you and your family.

How Can I Begin to Invest?

No matter how you go about it, you need an investment strategy. Investing is a big commitment, after all.

Do I Need a Financial Advisor?

Getting a financial advisor is appealing to beginners. Having someone give you financial advice and finding the next growth stocks to make you rich—who wouldn’t want that? However, their management fees can prove too expensive for small investors.

Robo-advisors work the same way, but they’re much cheaper. Since they’re not people, you can likely afford them. Here are a few companies who offer automated and human financial planner services:

Wealthfront
Vanguard
Stash
Chime
Aspiration
Charles Shwab

The Best Investments to Get Into

Now let’s get to work: how should you start building your investment portfolio? What financial products will give you a good return, even if you’re starting with only $100?

US Bonds

Getting US bond funds is one of the best investment decisions you can make when you’re starting out. These low-risk government bonds may have low annual rates, but they yield great results in the long run.

EE bonds are something to consider if you’ve wondered “How can I double my investment?” After twenty years, once the bond reaches maturity, you’ll have twice as much your initial investment.

On top of all that, the US government protects the money you put into the bond, making it a safe investment.

High-Yield Savings Accounts

Online saving accounts typically offer better annual percentage yields (APY) than traditional banks. In other words, you get “free money” just by storing your savings there.

You can take advantage of these online bank accounts both in the short-term and long-term. Right now, annual interest rates between 1% and 2%. CIT Bank and UFB Direct offer good rates, but you can get even more if you shop around.

The cherry on top of the cake is that opening a high-yield savings account is very low risk. They’re FDIC-insured, meaning your money is safe this way.

Money Market Accounts

Money market accounts are similar to savings accounts. They’re also FDIC-insured, but they can bring you even better returns. Their APY is between 0.5% and 2%. The more money you have in your money market account, the higher percentage you’ll get.

As always, contact different financial institutions offering this investment opportunity. CIT Bank and UFB Direct are both great options, but rates fluctuate.

Certificates of Deposit (CD)

Some people will tell you that certificates of deposit are boring and not worth it—don’t listen to them. They’re a stellar, FDIC-insured safe investment with good returns for how low-risk they are.

When you buy a CD, your money gets locked away until it matures. This can take anywhere between 6 months and 5 years, depending on what you agreed on at the beginning.

You’ll be rewarded for your patience with this type of investment. If you try to withdraw your money, you’ll get a penalty. But if you let it mature for longer (several years), you’ll get a more attractive APY.

Treasury Inflation-Protected Securities (TIPS)

This type of US Treasury bond is a good way of keeping your money safe over time, despite not boasting incredible gains. Their interest rates are fixed, but your investment is adjusted to match inflation.

Imagine that you invest in a TIPS with an interest rate of 0.5% and that inflation grows 2% over the next three years. When you withdraw your money, it won’t have devalued at all. You will even have made some cash from interest on it.

Plus, they’re easy to get started with. You can choose which TIPS to buy directly from the Treasury website.

Mutual Funds

When you buy access to a mutual fund, your money gets pooled with that of other investors. Then, a professional broker makes smart investment decisions for you. While the expense ratio may be a bit hard to stomach, it’s a great option for “clueless” beginners.

There are hundreds of different mutual funds. Vanguard is the world leader at the moment. Some mutual funds invest in the stock market and in index funds, others in real estate, and others in bonds. When they turn a profit, you’ll get your share.

The best thing about them is that they’re relatively safe. Because mutual funds put your money into lots of different financial products, you’re not putting all your eggs in one basket. Thus, even if some products depreciate in value, you won’t be in financial ruin. This is a step-up from stock funds.

Exchange-Traded Funds (ETFs)

ETFs are quite different from other financial products we’ve mentioned so far. For starters, their liquidity is high, since you can sell your ETF shares any time of day on the public stock exchange. Secondly, they’re quite diversified, as they can include commodities, foreign currency, bonds, and dividend stocks. Lastly, while the minimum amount you must invest can be high, the fees they carry are usually low and accessible.

Just keep in mind that ETFs are complex products. If you mean business and want to get a serious profit, there’s a lot to learn about these funds.

Peer-to-Peer Lending

What if you could lend your money to a person or company and make money from interest? That’s exactly what peer-to-peer lending is. It’s a bit like a bank, but on an obviously tinier scale.

When you buy someone’s debt, they’ll make monthly payments—with interest. That money is yours to keep. Since the current average annual return is between 5% and 9%, it can be an amazing way to make a profit. And the best part? You can get started with just $25, using LendingClub as your facilitator.

There are only two catches. For starters, they’re riskier investments, since they’re not backed by the US government. Secondly, dipping out and withdrawing your cash before the end of the loan is tricky.

Corporate Bonds

If your risk tolerance is higher, you should invest in corporate bond funds. You’ll lend money to a company, who will pay it back with interest. The minimum investment amount is $1000 and you’ll need to get a brokerage account, but it might be worth the hassle.

Since they’re higher-risk investment options, you’ll also get higher yields. Right now, you can get up to 3.5% APY—much higher than an online savings account.

Municipal Bonds

Municipal bond funds work similarly. Instead of lending money to a company, you’ll lend it to the government. Thus, your money flows to a community, which can be rewarding on its own.

Of course, you’ll also be making a profit. The annual returns on municipal bonds can go as high as 5%. Moreover, your investment is secured by the government. To get started, you just need a brokerage account, which you can set up yourself.

Real Estate

Investing in real estate is its own beast; there’s so much to learn about housing and commercial real estate markets. You could make money flipping or renting properties, depending on what sounds best to you. This is a riskier investment. Thus, you should be aware of inflated property prices and the potential for a real estate bubble, before sinking money into it.

Top 6 Best Investing Apps: Start Investing with Little Money

The world is changing and investing is too. These apps let you make the best investments from your smartphone for a low expense ratio. You don’t even need a lot of money to get started. Want to start investing with just $100? Put it into one of these apps and let their algorithms help you cash out a profit.

1) Acorns

Acorns is by far one of the best places to start. Link your credit or debit card to the app and let it do its work. The robo-advisors will invest your money in a good portfolio. You can even connect a Roth IRA or 401k to Acorns, to make the most of your investments.

There’s no minimum investment or minimum balance, making it a great choice for a low-cost investment. Plus, their membership access is affordable, starting at $15 per year.

2) E*TRADE

Buying into ETFs is no longer overwhelming using the app. Answer some questions about your risk tolerance and financial goals and you’ll have a portfolio of ETFs picked out for you. You can then tailor it as much as you wish.

Thanks to the low fees and intuitive user interface, this is a great app for beginners and savvy investors alike.

3) Robinhood

With Robinhood, you can trade cryptocurrency, stocks, and ETFs all without paying a cent in trading commissions. Downloading the app is free and you can invest as little as $1 at a time.

Using the app couldn’t be easier. The sleek interface gives you access to dozens of constantly updated stats and news stories so that you can make well-informed decisions.

4) Betterment

Betterment doesn’t require a minimum balance and lets you invest less than $100 at the start. Plus, their management and robo-advisor fees are affordable, given that you’re getting guidance on your investments. What’s more, the intuitive design will get you acquainted with the app in no time.

5) M1

For more courageous investors who want to be involved in their investment portfolios, M1 is a good pick. It gives you the option to invest in robo-advisor-selected ETFs and stocks, pick them yourself, or a combination of the two. This hybrid model gives you a lot of flexibility.

6) Fidelity Go

Fidelity Go takes the hassle out of investing. By asking you questions about risk tolerance and your financial goals, a financial planner can pick the ideal portfolio for you. As your needs change, so does your portfolio, ensuring you’re always getting the best deal possible. With a flat fee of 0.35% on all your investments, Fidelity Go is worth considering.

How Do I Invest Wisely? The Top Tips for 2020

You have to find the right balance if you want to get a good return on your investments. Especially during such an unpredictable time, smart investment planning is everything.

Diversify Your Portfolio

No matter your financial goals, you should always have a diversified portfolio. Don’t just buy individual stocks from Amazon or Apple, hoping they’ll double or triple in value. If they fail, you’ll lose it all. It’s always best to not put all your eggs in one basket.

Don’t Panic

If you’re investing in the stock market, try not to panic. Keep an eye on what’s happening in the world, but don’t make any rash decisions. Market downturns and upturns are normal, as we’ve seen with COVID 19. Try to keep a level head.

Only Invest Money You Can Afford to Lose

You should never, ever invest money you don’t have in stocks, real estate, REITs, bonds, or anything of the sorts. Don’t take out a loan, don’t dip into an emergency fund, and don’t leave credit card debts unpaid. You’ll put your cash flow in trouble and only hurt yourself in the long-run.

Bottom Line: What Is the Best Investment for 2020?

The best investment decisions for 2020 are to put money in low- or moderate-risk assets and to diversify your portfolio as much as possible. Buy CDs, find a high-yield savings account, acquire municipal bonds or Treasury bills, and buy into an ETF or mutual fund. No one can guess if the markets will soar or dip tomorrow, so it’s best to be prepared for any eventuality. Remember, no one gets rich quickly