Today You Will Learn: Investment
- What are the rules in the investment market;
- What is the best way to invest free money ;
- How to minimize risks;
- What useful tips experienced investors give to newcomers.
What Is Investing?
This form of passive income does not imply physical labor, allowing you to increase finances at any time. Well-known economists characterize investing as a contribution to their own prosperous future, which can free them from material problems in the future.
For most people, investing is associated with a complex process, with millions of turnover, in which only large corporations participate.
The Most Common Myths Are:
Investing is available only to wealthy entrepreneurs. Any person can become an investor and the contribution does not have a minimum threshold. Even the amount of 1000 dollars invested in the purchase of foreign currency in time can bring good interest.
An investor must have special education and business experience. This type of activity rather requires prudence, the ability to think logically and an understanding of the processes of the economy. If you do not want to delve into the structure of financial pyramids or fluctuations in quotes, you can limit yourself to bank deposits and long-term deposits with minimal risk.
All transactions are very risky. In fact, investing has many options, each of which is at risk. But any enterprise or its business is also not insured against ruin, fires or man-made disasters that can cause losses to the owner.
Investing is an interesting way to make money that has no limits. Start with small amounts and slowly move towards your goal.
Types Of Investments
For the work of economists, the classification of investment according to several criteria is used.
From the chosen form of ownership : private or public. Separation indicates who provided the funds for projects or contributions when you need to transfer money to any bank that time you can use pnc routing number
From the object : real, financial and speculative. The first involves the purchase of property rights, real estate, patents. The speculative ones are based on changes in the price of assets (fluctuations in currency quotes, the value of precious metals). Financial means operating with precious metals, shares or currencies.
From the duration of the investment period : short-term (no more than a year), medium-term (no more than 5 years), for a long period (more than 5 years).
From the purpose of investment : direct (commercial or residential real estate), real investment (in the construction of production or raw materials), non-financial (intellectual projects, scientific developments).
conservative, moderate and aggressive.
For a novice private investor, financial investments are of most interest. They are always aimed at obtaining material income. Various types of securities, units and shares in projects act as objects for transactions. This includes the purchase of stocks and debt securities, trade loans and bills.
Profit Can Be Obtained In Two Common Ways:
- Payment of interest due is stable and regular;
- Income from the sale of securities at an increased price.
- The beginning investor himself must decide what types of financial investments he will work with. Some people prefer long-term investments and constant stable income in a small amount. Fans of quick returns choose more risky operations with stocks and bonds.
You should start working with investments by studying the basic terms and concepts that are actively used by specialists in their work.
The most common are:
Assets – everything that can bring profit to the investor: stocks of companies, various real estate, precious metals.
Dividends – a certain part of the net income of a commercial company, which is distributed between its shareholders. The concept does not apply to profits made in investment projects.
Quotation – the price or fixed rate of the asset or financial instrument at which the transaction is planned.
A trader is a person who is actively trading in the finance market, operating with the money of investors.
Exchange – a market for various financial assets (currency, gold or stocks). This is a legal entity, which is a kind of intermediary between investors, sellers and buyers and sellers of financial assets.
Liquidity – the term refers to the ability of a particular asset to quickly market itself when necessary.
Kitchen is an investment company that does not conduct transactions in the real market, playing against its own customers.
Aggressive investors are players who are ready to take any risk for the sake of high profit.
Trusted Manager – during the term of the transaction, manages assets for the agreed percentage, but the funds remain with the owner.
Deposit – a certain amount that is deposited with the bank depository for safekeeping and can generate interest income.
In addition to general terms, a novice investor should know narrower names:
HYIP projects are specially designed investment programs that can bring a lot of income. The vast majority of investors classifies them as risky financial pyramids.
Ponzi Pyramid is a structure in which investors profit from attracted new participants. She worked actively in the beginning of the 90s, attracting people by making big profits in the shortest possible time (notorious MMM or Khoper-Invest).
PAMM-account – a special trading account, which has a module for managing the percentage distribution of finance between all participants. Its main function is to manage the total capital of several investors and the manager of this PAMM account . The latter receives a fixed percentage of income, and the total amount of profit is automatically distributed among all investors.
PAMM capital – accounts – the total amount of all investments accumulated in an open account.
Manager’s offer – a specially drawn up contract with an investor, which stipulates the percentage (or amount) of the income received, profit distribution rules and other important provisions.
Investment funds – specialized companies that are engaged in attracting cash investments with their further placement on PAMM accounts, start-ups , participation in exchange transactions and other projects.
Where To Start Investing: Useful Tips
Many wealthy entrepreneurs began with small investments in personal savings.
In autobiographies and useful articles, they willingly share with beginner useful recommendations that can be used at the initial stage:
Learning the basics of investing . To work in this area, it is not necessary to have an economic education and experience on the exchange. But knowledge of the basic terms and methods is necessary for understanding the processes, it will help to independently study market news and talk with brokers in the same language. To gain knowledge, you can regularly participate in seminars, get acquainted with articles by famous investors and managers, read books on similar topics.
We set a specific goal . After studying the important fundamentals of investing, you need to set a goal: what income should be received? Reaching this threshold stimulates and spurs action. It is better to break a large global goal (to earn a million dollars) into several real stages.
Choose a work style . There is an aggressive and conservative way of investing. Conservatives are more frugal and try to invest in low-risk assets. “Aggressors” are not afraid to take risks for the sake of making big profits. Further tactics of work, risk assessment of investments also depend on the method.
We determine the financial limit . You should start investing by counting your own free cash. Do not invest large amounts taken on credit at first. It’s better to start with small investments that you can part with without much loss. It is necessary to allocate a certain minimum amount for the start, the loss of which will not be global for a novice investor.
We are looking for a broker . This is an important step that should be taken carefully. A good financial specialist has many recommendations and clients. The final result directly depends on his mobility and ingenuity.
We assess the degree of risk . Any transaction in investing will have a percentage of risk. The choice of strategy is directly related to the final goals of the investor: if he wants a quick profit for buying a holiday package, he will have to pay attention to transactions with a high degree of risk. If the task is to collect additional income for retirement, you can restrict yourself to working with proven financial assets (long-term deposits with the bank).
Choose a field for the activity . At the initial stage, it is better to separate finances and try working with different types of investments to purchase currency, stocks and deposits. After summing up the first results and making a profit, it will be easier for a novice investor to decide on the direction of work.
We diversify investments . This is the basic rule of any investor, which is to use several tools at the same time. For example, the opening of long-term deposits, the purchase of precious metals and participation in mutual funds, which will give profit at different times and provide the investor with a stable income, will be a good option.
We often review our portfolio. When working with several types of financial projects at once, it is necessary to constantly monitor the level of prices, stock market news. Some securities quickly go down or rise in price, so a newbie must keep an eye on the balance of his assets.
A beginner investor should remember these rules of work and actively use them in all areas: real estate and bank deposits, the foreign exchange market and mutual funds.
Basic Ways To Invest For Beginners
Analyzing the work of experienced investors, their level of income and preferences, you can make a kind of rating of affordable and simple types of investment for beginners.
This financial instrument is considered the most reliable and affordable, because there are bank branches even in small towns and cities. The positive features include deposit insurance up to 1.4 million dollars, which guarantees a 100% return on investment. This is the answer to the question: where to invest without risk? The presence of special programs and online dashboards for users makes it easier for an investor to track bids, and to create new profitable offers.
Of the negative aspects – a low percentage on deposits, which will not bring excess profits. Investing in bank deposits is more suitable for long-term investments for the future, which will give a good increase in retirement or help to collect for the purchase of real estate for the family.
Securities Of Any Kind
This type of investment requires advanced skills in the field of economics. Securities, bonds or bills are suitable as securities. The choice should be reasonable and practical, based on market trends, analytical data. Alternatively, you can entrust your investments to professional market players.
The profit from securities does not have a maximum, but this type of investment does not give a 100% guarantee of its receipt. There are many cases when the shares of a little-known enterprise in a few years brought an income ten times higher than the initial investment.
Real Estate Acquisition
Investing in real estate is a popular option among investors at various levels. Housing is always in demand, it can be sold in the secondary market. The main difficulty is the dependence of prices on the state of the economy in a region or country.
In the case of real estate, an investor can receive income in two ways:
- Active (its implementation);
- Passive (rental).
Among professionals, there are whole schemes for working with real estate that give a good profit.
For this, apartments and houses are purchased:
At the stage of laying the foundation and before the implementation of the entire residential complex, when the price is the lowest;
At the time of maximum price reduction in the real estate market due to economic or political circumstances;
In uninhabited condition, they carry out repairs with minimal costs and implement them with a high margin.
In recent years, the following type of passive income has gained popularity : an investor acquires an apartment on the ground floor of a building, converts it into a non-residential premise and rents it out to an office, store or pharmacy to third parties. This is a very profitable event, because the monthly rent is 3-4 times higher than payments for a residential apartment.
This name is often found by active users on the Internet. Forex is an international financial market in which currencies are exchanged at free prices. It is open and accessible to beginners and experienced investors, private individuals. There are special training programs that, on a free basis, introduce the rules of working in the market. If there is no desire to understand the intricacies of currency transactions, you can resort to the services of trusted traders.
The purchase of precious metal products and bullion can be called the most ancient type of investment on the planet. In addition to gold, platinum, silver and palladium can also bring good income. Over the past decade alone, the market value of gold has grown 6 times.
Costly metals are not subject to deformation and corrosion, are in stable demand even during the economic crisis. In any situation, they are easy to implement and receive money.
In addition to buying scrap and jewelry, there are several other ways to invest:
- Acquisition of shares or shares in a gold mining company;
- Buying quality bars;
- Opening a depersonalized metal account ;
- Opening of a special “golden” deposit in a bank.
The latter option makes the profit the fastest, has minimal risk. Interest on such a deposit can be received in any currency, as with a conventional deposit.
Mutual Investment Funds
The essence of the activity of a mutual fund (unit investment fund) is the disposal of assets that investors provide on the basis of an agreement. Fund experts invest them in profitable commercial projects, securities of enterprises, receiving interest from trust management of money. Relations between the parties are regulated by a special agreement.
The Positive Side Of Investing In Mutual Funds:
- Professionalism of employees who are experienced investors;
- Accessibility to any individual;
- State control over mutual funds;
- Lack of income taxation.
- Participation in mutual funds brings an average of 20-30% of profits, which significantly exceeds the rates on deposits of well-known banks.
Quite a risky way to invest for beginners. Only every 4-5 project gives good profit, and you need to have a certain entrepreneurial instinct to determine it.
You can find a project for investment on special sites, or by offering your investor services to proactive friends. The choice of direction is unlimited by the type of project or its geography: modern technologies do not require the presence of an investor in a team, so you can invest in domestic or foreign startups.
A novice investor should not actively engage in unfamiliar types of investment. It is better to give money to the most studied market tool or to resort to the services of experienced traders, investment funds. Diversification in several ways will increase the chances of a high income and reduce the risk of losses.
How To Avoid Investment Risks?
Profit from investments is almost always accompanied by risk. It is the higher, the greater the estimated income from the transaction or deposit.
Absolutely safe financial instruments do not exist, and even a stable bank can go bankrupt in an economic crisis.
Investment experts give some useful tips to help a newbie avoid failures and get a first return:
It is necessary to invest amounts not intended for the needs of the family (payment for food or housing). It is better to manage “free” finances, the loss of which will not lead to a decrease in the usual standard of living;
Remember the rule of diversification: do not invest all available funds in one project, but distribute it into several different options;
Withdraw money and income from the project as soon as possible, timely review the status of all investments;
Turn to the help of professionals, select traders based on reviews and recommendations;
Do not succumb to emotions and an inner voice that will push towards rash impulsive decisions in the hope of making a quick profit. Each contribution should be considered from all sides.
Common Mistakes Of A Novice Investor
The main misconception is the need to have a large starting amount for the initial work. Many investors started with small personal savings that came back with income. Any financier will confirm that it is better to put them into circulation than store them in anticipation of a “rainy day”.
A novice investor can quickly lose money if he makes such mistakes:
Do not engage in self-development and neglect the study of the basics of investing . The completeness of information and the ability to analyze it are of great importance, will help minimize risky transactions;
Fear of complete collapse . Investing will always be accompanied by the risk of losing part of the capital. A reasonable approach and constant study of trends will help to develop a professional instinct, to quickly navigate in the fluctuations of courses;
Expect a big income . Many investors prefer steel transactions with an income of 10-15%, which have minimal risk. This helps to build up capital gradually, without losing or disappointing in the chosen activity;
Use loans and borrowings . Loss of these amounts will lead to a big loss and the need to pay additional interest from your own money;
Blindly trust ratings . A novice investor should constantly consider information that helps to choose the best project. But the rating should be supported by personal knowledge, analyzes of the latest news from exchanges or the market;
To be lazy . Those wishing to make a large profit from investing should remember that this is a type of business for active people. You can attend time management trainings , devote more time to motivation and communication with dynamic entrepreneurs, and start learning foreign languages.
Investing is a serious and interesting type of activity that can turn passive savings into a stable income. Perhaps this exciting process will appeal to novice investors who want to make it their main and favorite job.