3 Ways to Use Investing to Build a Healthy Financial Future

In the US, just a bare majority of people – 55% to be precise – have a stake in the stock market. And that’s a shame, given that it’s proven time and again to be the most reliable way to build wealth. That means investing wisely in the stock market is an essential component of building a healthy financial future.

There are a variety of reasons people don’t invest, however. For some, it’s a perceived lack of starting capital. For others, it’s a lack of understanding of how the markets work, which leads them to fear getting in over their head. Whatever the reason, though, it’s a financial mistake that can be difficult to recover from.

But getting started with investing doesn’t have to be that hard. There are a few simple ways that anyone can start investing, no matter how little money they have to begin with. Here are three of them.

Turn to a Robo-Advisor

By far, the easiest way to get started investing in the stock market is to use a robo-advisor. They’re automated investing tools that allow you to set your own goals and risk tolerances to create customized investment plans. They’re an excellent option for beginners because they don’t require any detailed knowledge of the stock market to use.

There are a variety of robo-advisors available for investors, and the best of them feature very low fees and low minimum investments. That means they have very low barriers to entry. They also do a great job at maintaining a diversified portfolio for you, so you’ll have some protection against losses. They’re essentially a set-it-and-forget-it solution, and you only have to make changes as your investment goals and risk tolerance evolve over time. So you can exercise as much or as little control as you like as your investment account grows.

Build an ETF-Focused Portfolio

If leaving your money in the hands of a computer isn’t to your liking, there is a way to replicate many of the benefits of a robo-advisor with a DIY approach. The secret is to build a portfolio focused on exchange-traded funds (ETFs). They’re like conventional stocks, except that they’re designed to track the performance of specific underlying assets. They allow you to gain exposure to assets you couldn’t afford individually, wrapped in an affordable package.

The reason they’re a great way to build a starter portfolio is that they make it simple to diversify your holdings. All you have to do is select ETFs that meet the criteria of your target asset allocation, and you’re all set. And because there are now over 1,300 ETFs available to choose from, it’s never been easier to do it. That simplicity is also one of the reasons that many robo-advisors tend to build ETF-heavy portfolios, too. And if they can do it, so can you, as long as you’re willing to do a little bit of reading.

Trade Options and Futures

Although it takes a little bit of extra knowledge to do well, one of the best ways to build wealth in the stock market is by trading options and futures. They’re essentially contracts that let you speculate on price movements you believe will happen to a given stock or asset. The key difference between the two is that an option provides you the right to buy an underlying asset at a specific price on a specific date. But a futures contract obliges you to do so.

The reason trading either is a great way to earn solid returns is because it lets you capitalize on the volatility of the market itself. By executing a large number of high-speed transactions as prices fluctuate throughout the trading day, you can earn far more than you might with traditional investments. And because there are now algorithmic trading solutions that can assist you with developing a strategy and executing it, you don’t have to have as much in-depth market knowledge as you once did to succeed.

The Bottom Line

Any way you look at it, investing in the stock market is one of the best ways to make your money work for you to build a healthy financial future. And given the fact that most businesses no longer offer generous pension plans and other retirement benefits, you can’t afford to ignore it if you plan to retire in comfort.

And as you can see, using any of the three investment methods listed here can help you to get started even if you have no previous experience trading stocks. Robo-advisors are the simplest way, but you can branch out to the other two methods as your comfort level grows. Between them, you should be able to build enough wealth to see to your financial needs for as long as necessary. And if you work at it, you might even end up improving your financial condition beyond what you ever thought possible.

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