The No.1 investment you’ll make in 2014

People love to retire early. They work hard to enjoy time doing as they please.

I like the idea of retiring early, but I know it’s not going to be easy, even possible. However since I first began learning of Australian and global financial markets and specifically, how to profit from them, I realised investing is one of the best, if not the best, way to reach my financial goals.

Retired by the time I reach 50? I don’t know about that, but what I am sure of is this. Every time I make a financial decision, whether in stocks, bonds or property, I will carefully scrutinise the investment and it’s potential to deliver greater wealth in the long term. I learnt how to do this by reading websites and books, and taking courses aimed at financial markets.

Despite all his work in physics and politics, Benjamin Franklin’s quote on investing is the most important lesson I’ll take with me. He said: “An investment in knowledge pays the best interest.” He was right. Learning how to invest is more important than investing itself.

However a lack of confidence persists in the minds of many would-be investors right around the world. This is because of the prospect of losing hard-earned cash. And rightly so, no one likes to lose money.

The lack of time and knowledge prompts many people in the direction of fund managers and financial planners. That’s fine, provided you get a manager who actually has your best interests at heart – for a small fee, of course. But even then, there’s no guarantee of success.

So if you’re still sitting on the fence, thinking you’re not sure how to invest, why not make it your 2014 resolution to get on top of your finances and set yourself some goals. Begin watching companies and set aside some money each week/month/quarter to invest. To get you started, here’s five financial companies that suit different types of stock market investors.

Stocks for a balanced portfolio

Firstly, fund managers like Magellan Financial Group Ltd (ASX: MFG) perform exceptionally well when the market performs strongly. No surprises there. Instead of putting your money with a fund manager (for a small but significant fee) you can invest in a company which invests others’ money. Magellan is one of the best.

Many investors getting into the market for the first time want to buy stocks in companies they know and trust. Of the big banks on the ASX, I believe Australia and New Zealand Banking Group (ASX: ANZ) has the greatest long-term potential. However, it doesn’t come cheap and investors might want to wait for a lower entry price.

Stocks for a growth portfolio

Many everyday investors don’t like to venture outside the top companies listed on the market, but it’s harder for a blue chip, like ANZ, to double in size in just one or two years, than it is for a smaller company. Three small companies which are exciting growth prospects are Collection House Limited (ASX: CLH), Credit Corp Limited (ASX: CCP) and Mortgage Choice Limited (ASX: MOC). Each pay a great dividend and have delivered market-beating returns over the past five years.

Foolish takeaway

If you take my advice and grab hold of your financial freedom, you’ll learn by your mistakes as well as your successes. Don’t rush to buy stocks, learn how to invest by reading articles online and paper trade at first. If you do, there’s a good chance it’ll be the best investment you’ll ever make.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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