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Stocks and Bonds, Piggy Banks, Mattresses Full of Cash |
| Date Added: February 15, 2011 09:41:25 PM |
| Author: pds20 |
| Category: Shopping And Services: Financial Services |
| Investments will usually fall into one of two categories. First, an investment can be the purchase of goods, supplies, tools, or equipment to use in the production of increasing profits. For example, a business owner who builds gazebos may get tired of swinging his hammer and decide to purchase a pneumatic nail gun that quickly drives nails in the hopes that the time saved will allow for the production of more gazebos, increased sale, and bigger profits. The second basic category an investment falls into is what most of us think of when we say we are investing our money. That is, we use the money we invest for the sole purpose of making more money from it. There are several different ways of investing money in the hopes of gaining a profit. Stocks and bonds, exchanging currencies in the Forex market, annuities, buying government bonds, certificates of deposit, mutual funds, real estate to sell at a profit later (Flip That House!), IRA’s, even simple savings accounts, are all methods of investing. Loaning your sister-in-law a few bucks (at a reasonable interest rate) to provide her with some start-up capital for her new business is an investment. Generally speaking, the riskier the investment, the more opportunity there is to make a bigger profit; the less risky, the lower the returns and the longer it will take to see those returns. The FDIC guarantees savings accounts and therefore, putting your money in a savings account with the idea that you will get a fantastic return on your money is not very realistic. Very safe, but not realistic in terms of generating a huge profit. Of course, it’s always a good idea to have liquid assets, and a savings account is one way to accomplish this. Most middle-class Americans should have enough in their regular savings account to tide them over for up to three months in the event of a financial emergency or job loss. • *Quiz: Does stuffing your money inside your mattress qualify as an investment? (see answer at end of article) Purchasing stock in a company makes you part owner of that company. The two ways you can make money from owning stocks are to secure dividends and/or sell the stock for a higher price than what you paid for it. Simple enough, right? Well, the basic concept is quite simple; it’s the day-to-day reality of the stock market that makes this type of investment a bit more complicated. There is no guarantee whatsoever that the stock you choose will make a profit. In fact, you can easily lose your money. The potential for a tremendous profit exists, however, the reverse holds true and it is possible to lose your entire investment if you don't implement basic stock managment safeguards by failing to diversify your portfolio and risking your entire investment on one single stock or utilizing stop-losses options. When you are deciding how to invest your money, the two major considerations are how much of a return on your investment you want to see and how much risk you are comfortable with. Once those two questions are answered, it is time for you to seek out an investment professional and start investing in your financial future. As with most things in life, getting started is often the hardest part. It takes a bit of work – researching how the market works, what the different terminology means, what kinds of companies you are interested in, what your life goals are, and so on; it also takes a small leap of faith to actually send that first bit of money off to the investment world. So, the first step in answer to the question “how do I start investing in the stock market” is to make the decision to do so and take the requisit actions to keep yourself from backing out. • * No, sorry Homer Simpson. The mattress stuffed full of cash qualifies as hiding or saving, but not investing. |
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