Investing is generally a long-term process
Yes, you can get 7-8% annually, just maybe not this year... or the next.
There are several ways to get the average percent. However, there will be some years you may be down and other years you may be up. In fact, some years may be way up and some years way down. The down years will be scary. Everyone has a theory about down years but overall it has been proven that not getting scared is the best plan. It may take several years for a comeback but the market has always come back and kept the average alive. The 7-8% annual is over a long period of years (more than 10 years).
You may invest in any of the three ways previously mentioned: Advisor/Broker, Robo-Advisor, or Do-It-Yourself. The advisor/broker concept can be done either through a financial company with a brokerage division or through an insurance company that specializes in retirement investing.
- Do-It-Yourself - make all of your own decisions -the least expensive method.
- Join a Robo-Advisor Company - a computer program will create your personalized account - reasonably inexpensively. This is a new type of investment method that is gaining a lot of momentum now. It is presumably the simplest method. It basically follows the basic rules of good investing. Buy into the indexes, diversify your portfolio, pay the minimum in fees, tweak the account very little, let the investment work over the long run.
- Join a financial institution - have a stockbroker and/or financial advisor help you out - with much higher fees.
- Join an insurance company - put in monthly installments, pick an investment (GICs, ETFs or mutual funds are the investments they usually have available)
- Try a Virtual Online Company test program - earn to invest via a virtual setup using a financial company program or an on-line company program test program. No real funds are used - just a fictitious amount is started with. Test by getting a few ETFs then a few mutual funds then a few blue-chip stocks and a few mid-range stocks. Leave half of the investments alone and trade a few them to get a feel for the action of the stock market. While learning to invest virtually, learn about investing by reading and see what may be learned via a professional broker or advisor (so long as it is free).
- Research - after a while, it is reasonable to start looking at figuring out what kind of financial institution you would like to use. There are lots of banking institutions, brokerage houses, on-line brokerage companies, insurance companies (mainly for retirement planning), and the new Robo-advisors. Each one has its special features so there is a lot to think about. Remember though that if you wind up with a professional advisor it is still up to you to do lots of the work. They know the business but they don't know how to predict the future. Save up funds in a separate account for investing - once you've learned how to do it. It is reasonable to start when you have about one-thousand dollars to work with. If you wish to start earlier you must make sure that you buy an investment that has super low costs like an ETF. Anything else might have annual fees that eat up any profit and may even reduce your actual investment.
- ETF's - Search through companies offering ETFs and ask them a few questions. Ask them what ETFs they offer that are best suited to provide a 7-8% annual return over a long period of time.
- When starting off, buy ETF's and MFs - they expose you to top-ranked stocks but in a safer system. The best ones to start with are buying an ETF or MF for the Nasdaq or Dow Jones top stocks. These are the simplest ones to start with. Branch out from there. Also, watch out for service costs. Some may be high and eat into your profits. Before buying any ETFs or MFs check the internet to compare service charges and upfront or back end fees.
- The Safer System to start with - by getting a bunch of stocks, which MFs and ETFs are, some will go up and some will go down. But you won't lose your funds on one stock. It is important to build up a series of major stock index ETFs and maybe some major stock index mutual funds (must watch the costs of these as they can be expensive to service).
- Buying individual Stocks or bonds - only after a series of ETFs and mutual funds are in place is it reasonable to buy individual stocks or bonds. Buying individual stocks should not be bought until well-experienced trading ETFs as individual stocks are much more volatile. If buying individual stocks, it is best to start off with stocks in the major indexes. Those stocks are in the major indexes because they are the biggest and the best stocks generally. Buying other stocks is riskier, therefore, may reduce the profitability of a portfolio.
From Investopedia: 'Historically, investing in stocks has handily outperformed investing in bonds, Treasury bills, gold or cash over the long term. In the short term, one or another asset may outperform stocks, but overall, stocks have historically been the 'winning path'. That is the reason for starting off with ETFs and mutual funds of major indexes only.
The major indexes mean that the ETFs and mutual funds are investing only in the highest quality stocks or other investments. That way you know that your investments are mirroring the real-world stock indexes. If the stock index goes up, your value should be going up. If the stock index goes down, your value should be going down.
A very savvy investor once figured out that simply buying the major indices was the simplest way to successfully invest in the market. There is a group of people that follow that mantra and have been very successful. Check Forbes to know more.
Read more:
Investopedia - Getting Started In Stocks
Investopedia on Facebook
The Simple Dollar - where does the 7% come from
CNN Money - Retirement Investments at 7% average per year
ETFs:
ETFs and Mutual Funds:
Financial Post - ETF's vs Mutual Funds
Forbes: ETF's vs Mutual Funds: What is the difference?
Investopedia - Mutual Funds vs ETFs: What's the difference