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How to Invest Money in the United States

We hear from so many in our community that achieving financial stability is a primary goal, but what is not always common knowledge is that it takes more than building up your savings each month. Achieving financial success means investing intelligently.

This may feel daunting and complicated as there’s a lot of uncertainty around where to invest while keeping the risks low. That's why we put together this handy guide to help you learn about the risks, benefits and strategies for investing. We’ll share important tips so that you can see your money multiply!

What is an Investment?

An investment is an asset or item acquired to generate income or appreciation (increased value). In other words, we invest money that we set aside with the expectation that it will bring us a greater amount of income in the future. This higher amount of income can be returned in the short or long term. 

Investing  comes with a level of risk, since the returns are usually uncertain.By taking these risks, investing can provide you and your family with economic growth and stability. 

What is The Difference Between Saving And Investing?

Saving and investing are closely related, but they are different concepts. Savings is money that a person puts away to use in the future. The most common ways to save are: keeping cash somewhere in your home (such as a safe) or in a bank account which can earn interest.  

The main difference between saving and investing is that you hold on to your money with savings. When you invest, you give your money to a company or a person in order to earn higher profits in the future.  If you limit yourself to just saving, the value of your money decreases over time due to inflation. If you consistently invest your money it will continue to grow, and inflation will not impact you as much.

What Are The Benefits of Investing?

Investing involves taking risks. By taking these risks, you can reap benefits that can greatly improve your finances. Some of these benefits are: 

  • Saving time. Investing money gives you the opportunity to meet your financial goals in less time than you would by just saving. 
  • It’s highly regulated. The amount of strict regulation and oversight for investing can provide you with security.  
  • It’s easy to track. Technology allows you to instantly track your investments’ value so you know what they’re worth and if you need to sell or buy more. 
  • Investment diversity. There are plenty of ways to invest and grow your money, the trick is to look for investments that best suit your tastes and needs. 
  • Entering other markets. With the wide range of investment types available, you can  access international markets and expand your abilities to generate income. 

What Are The Risks of Investing?

Investing money means risking a loss. It’s important to evaluate investment risks and do your best to mitigate them. The types of risks are usually classified in the following ways: 

Systemic risk

Also known as market or non-diversifiable risk, this risk is directly related to economic crises, since it includes factors that may affect the market in general. All investors are exposed to this type of risk, regardless of the company they invest in. 

Non-systemic risk

Also known as diversifiable risk, this includes internal factors that may affect a specific economic sector. To reduce this type of risk, we recommend diversifying your portfolio. You can do this by investing in different companies and industries. 

Credit risk

This type of risk refers to being unable to pay back borrowed money. Usually, banks and credit unions take on this risk. That’s why these institutions do some research to determine your or your company’s liquidity before giving you a loan.  

Interest rate risk

This type of investment risk depends on interest rate changes in the market. It can affect all assets, but fixed-income investments, such as government bonds and certificates of deposit are the most at-risk types of assets. 

Liquidity risk

An asset’s ability to be converted into cash is called its liquidity. This refers to an individual or company’s ability to meet its financial obligations in the near future. This type of risk can be observed when a company has short-term debts and has to sell its assets below market value. 

Inflation risk

This type of risk depends on potential inflation rate growth and affects a company’s purchasing powers, resulting in a negative return on investment.  

Legislative risk

This type of risk involves governmental decisions, such as eliminating, creating or modifying laws that affect the economic sector that a person or company invested in. 

Types of Investments You Can Make in The United States

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There are several options for investing, so we’ve put together a list of some of the most profitable ones:

The U.S. Stock Market

Buying and selling stocks on the stock exchange is one of the most profitable ways to invest. To do this, you’ll have to hire a broker or stockbroker. These companies act as an intermediary in purchasing and selling assets in the stock exchange. Some of these companies are: 

Keep in mind: To start investing in the stock market, it’s important to do some do diligence. Check out this SABEResPODER article to find out everything you need to know about how to choose a broker, the process of buying shares, and how to make this type of investment.

Mutual Funds

Mutual funds are investment companies that pool together several investors’ money to invest in bonds, stocks and other types of assets. The main characteristics of mutual funds are: 

  • Investors buy shares from the fund itself rather than from brokers who work on the stock exchange. 
  • The amount that investors pay for shares is the net asset value (NAV).  
  • This price is usually added to the shareholder fee charged by the mutual fund at the time of purchase.
  • Shares are redeemable. In other words, investors can sell their shares back to the same fund or to one of its brokers. 
  • Mutual funds sell their shares on an ongoing basis in order to bring on new investors.  
  • Their investment portfolios are managed by investment advisors registered with the Securities and Exchange Commission (SEC). 

Open your own business

Opening a business is undoubtedly one of the best ways to invest money in the United States. The advantage of this investment is that you can have more control over your expenses and profits. Keep in mind that like any type of investment, it may involve risks related to changes in the market. 

Starting a business requires commitment, perseverance, and patience. Here are some profitable business ideas that you may want to consider: 

  • Food business. The food business is ideal for people who enjoy cooking. Within this line of business there are a variety of options: you could opt for a catering business, selling baked goods, or opening a restaurant serving traditional food from your country of origin. Just keep in mind that the restaurant industry is known to be particularly challenging, so ensure that you’re prepared before starting. 
  • Cleaning business. This type of business can be very profitable. Cleaning businesses don’t require a large initial investment because they can be launched from home. 
  • E-commerce. Another type of business with a low startup cost is selling products online. Just pick the products you want to start selling and advertise them on platforms like eBay or Amazon.

Cryptocurrencies

Investing in cryptocurrencies, or crypto, has become increasingly popular in the United States over the last decade. Investing money in these new currencies can yield high profits, but it’s considered a high-risk investment. Only invest money that you can afford to lose and that won’t seriously impact your finances if the market changes aren’t in your favor. 

If you’re considering investing in crypto, we suggest taking the time to learn as much as possible on everything related to these currencies before taking the first step. You can start by checking out these introductory articles: 

Real Estate

Investing money in real estate is popular in the United States because it can generate great returns in the near or long-term future. This is because you can rent-out the property you buy resulting in consistent, dependable profits. Later one, you can choose to sell it at a higher price and make more profit.

You don’t have to be a U.S. citizen to invest in real estate. The biggest challenge with this type of investment is that the initial investment is very high compared to other forms of investment on this list.

Retirement Funds

Opening an Individual Retirement Account (IRA) is an investment that everyone living in the United States should consider at some point. Unlike other types of investing, with an IRA you can invest money without running the risk of losing it. In fact, you can get important financial benefits like tax incentives. In addition, you can schedule automatic deposits from your savings account to your IRA. 

Tips For Investing Money in The United States

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If you are determined to invest your money and make it grow, you should consider the following tips.

Decide what type of investment is right for you

There are plenty of sectors that you can invest in. Make sure to do some in-depth analysis before making any decisions. Some types of investments are: real estate, mutual funds, cryptocurrencies and opening your own business, and others. 

Do your research first

Every investor should do a fair amount of research before putting their money at risk. Do some digging— investigate the sector you wish to invest in and find out the potential risks and approximately how long it will take to see any returns. 

Make a plan based on your goals

Make sure your goals are realistic. Set goals that are achievable in the short term, but don't neglect your long-term ambitions. Review your plan on an ongoing basis (at least once a year) and adjust it as your circumstances change. 

Don't invest more than you can afford

A good investor is also a good money manager. Make sure all your expenses are covered before investing any money—don't risk your family's stability! To get a better idea of how to manage your budget and how much money to invest, we recommend this simple guide

Diversify your investments

According to Forbes, "Investment management risks are often linked to one main factor: the concentration of capital in the same investment asset." The best way to reduce these risks is to diversify your investments. As the saying goes, "don't put all your eggs in one basket." If you make different types of investments and one does poorly, you have others to fall back on. This way, you’ll protect your money and your chances of earning a profit. 

Stay positive 

A positive attitude is key to being a successful investor. Investments always involve risk and you may not do as well as you might want at the beginning. With optimism, a little patience, and perseverance, you can achieve financial success. 

Ways to Invest Money in The U.S. as an Immigrant

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There are special visas in the U.S. that allow people without citizenship or permanent legal immigration status to become an investor. These are: 

Immigrant Investor Program (EB-5 visa).

The Immigrant Investor Program was created by the U.S. Congress in 1992 and is managed by the USCIS. Its objective is to stimulate the national economy through capital investment by immigrant investors, resulting in job creation. Investors who join this program acquire the EB-2 visa, Its main appeal is it facilitates eligibility for a Permanent Resident Card or Green Card. The two main requirements to participate in the Immigrant Investor Program are: 

  • To have made an investment in a U.S. commercial enterprise 
  • That the enterprise creates at least 10 permanent jobs for U.S. workers 

Treaty Trader Investors (E2 Visa)

If you have enough capital to become an investor in the U.S. and are a citizen of a Latin American country, then the E2 visa might be right for you. This type of visa is a "non-immigrant" visa, meaning that it doesn’t give you access to a Green Card. You’ll have to renew it on a regular basis. The purpose of obtaining an E2 visa is to become an owner of an existing business or to start one from scratch. With this visa, your immediate family (spouse and children under 21 years of age) can apply for a derivative visa. Below are the derivative visa requirements

  • You must be a citizen of a country that the United States has a trade agreement with. Some of the Latin American countries on this list are: Argentina, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Honduras, Mexico, Panama, and Paraguay.
  • You must have invested or be in the process of investing a substantial amount of capital in a U.S. company. 
  • Prove that you own at least 50% of the company or hold a management position that gives you operational control over the business. 
  • The business must have all licenses and permits required by law to begin operations. 
  • The business that you invest in must make a significant contribution to the community’s economy. It must generate jobs for U.S. citizens. 
  • The investment money must be verified as being of legal origin: savings, inheritances, and even loans. 

How Can I Invest in The U.S. Without a Social Security Number?

There are many ways to invest, and not all of them require permanent legal immigration status. If you don’t have a Social Security number and want to invest in the U.S. financial markets, you can do so through a brokerage firm or broker. Many of them only ask for an Individual Taxpayer Identification Number (ITIN) or another form of identification to open an investment account. If you don’t have an SSN, consider calling a broker to ask about identification requirements and make sure there won’t be any impediment to opening an account. 

What is The Minimum Amount That I Can Start Investing With?

There isn’t any exact formula for how much you should invest. It’s important to know what type of investment you want to make, be clear about the risks you are willing to take on, and have clear short, medium, and long term objectives. 

Invest And Watch Your Money Grow!

There’s always a level of risk involved with investments, but the potential for success is high if you do your research and invest strategically. We hope that this guide will help you invest if you choose to do so! 

If you have any questions, feel free  to ask the SABEResPODER team of experts. Don’t forget to consider using PODERcard to manage your investment returns!