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In fact, if you invest effectively enough, you could eventually live off the earnings and interest from your investments. Start with safer investments, such as bonds, mutual funds, and retirement accounts, while you’re still learning the market. When you’ve built up enough money, you can move on to riskier investments, such as real estate or commodities, that have higher potential returns. Money market accounts are savings accounts that typically require a higher minimum balance, but pay a much higher interest rate. Often, this rate is in line with the current market interest rates.
If you have an existing relationship with a bank, that may be a good place to open a money market account. However, you might also want to shop around for the best interest rate and minimum deposit requirements that meet your needs and your budget. Many credit card companies, such as Capital One and Discover, also offer money market accounts that you can start online. A CD holds a set amount of your money for a set period of time. During that period of time, you can’t access your money. At the end of the time period, you get your money back plus interest. All FDIC-insured banks offer CDs with different terms and minimum deposits, so you can easily find one that suits your needs.
Some online banks, such as Ally, offer CDs with no minimum deposit requirement. When you open a CD account, read your disclosure statement carefully. Make sure you understand the interest rate, whether it is fixed or variable, and when the bank pays interest. Check the maturity date, and evaluate any penalties for early withdrawal. Pick stocks in companies and sectors you understand. As a beginning investor, you don’t need a broker to start investing in the stock market.