Many people want to start investing their money but aren’t sure how to begin. It can be intimidating to invest, but it can also be one of the best financial decisions you make.
How you invest your money will depend on your personal financial goals, so it’s best to prepare before you start throwing money into different types of assets. When you start out, it might not be clear which investments are best suited for your personal goals and timeline, but there are some general guidelines you can use to structure a portfolio that works for you.
Different goals require different strategies
When you decide to start investing, take time to outline your personal financial goals and time horizon. Do you want to earn substantial cash flow quickly in an effort to save for a down payment on a home or a car, or do you want to invest in assets that build value over the long term to boost your retirement savings?
Assets exist that will help you reach both goals, and you will want to create a portfolio that combines assets that generate short-term cash flow with more conservative assets that deliver returns at a more measured pace. Your overarching financial goals will provide a roadmap on how to balance your portfolio between these types of assets.
The importance of diversification
It might be tempting to put all of your money into high-growth stocks for rapid monetary gains or conservative options that preserve your capital, but an all-or-nothing strategy is never wise when investing. Instead, you want to rely on a core tenet of successful investment strategies: diversification. Diversification comes in many forms, but it basically means spreading out your investments over several different industries, types of assets and locations.
All of that variation offers valuable protection when a single part of the market dips. While you can tilt a properly diversified portfolio toward either high growth or long-term value by investing more in certain asset types than others, you don’t want to fully commit in a single direction.
Why real estate works
Real estate investing is the ideal way to diversify a portfolio regardless of an investor’s goals or timeline. With single-family rental real estate investments, you earn consistent cash flow from tenants’ rental payments and build equity in a physical structure that will hold its value over time. You’re also more protected from rises and falls that periodically affect the stock market.
By choosing a rental investment that’s in an area with a strong rental market, you ensure consistent returns and make it easy to find tenants. HomeUnion allows new investors to quickly enter the rental real estate market by providing access to hundreds of prevetted listings in the best markets for single-family real estate investing across the country. HomeUnion makes investing in real estate as easy as buying stocks for those new to investing thanks to an in-house lender and provided property and tenant management.