Investing 101 – How Investments Work “Time is money” is a popular phrase written by Benjamin Franklin in Advice to a Young Tradesman. Many people are successful, not because they labor or toil all day. There are laborers who do the same but still end up penniless. Successful people use their time to earn more money. For them, to attain financial security, they would save and invest over a long period of time. In time, their money would reap money and that is what you call, investing. Why Invest? There are many reasons people invest. The most compelling reason is that you don’t have to labor your entire life if you put your money in the right investment. If you will just keep your money in your back pocket, your money will not work for you. By investing your money, your capital will build up overtime. Whether you invest in stocks, bonds, mutual funds, options and futures, precious metals, real estate or a small business, the goal is still the same – to make investments that will produce more cash for you in the coming years. Remember that your body will grow weak, you cannot labor all your life. By putting your money in an investment, you will generate more and you can save just in time for retirement. Types of Investments There are three types of investments and they are classified as ownership, lending and cash equivalents. Ownership investments are the most volatile and profitable type of investment. Example of ownership investments are stocks, business, real estate and precious metals like gold and silver. Lending investments are low risk. They offer less return. With this type, you work like a bank. It simply means that you are lending your money to a bank, a government, or a business. Examples of this type of investment are bonds and savings account. Essentially, if you have a savings account even the regular type, you are lending money to the bank, which will be used in forms of loans. Cash Equivalents are the most liquid assets found in your investment portfolio. These are assets that convertible to cash. Money market funds or money market a mutual fund is an example of this type of investment. Misconceptions Many believe that beds, cars, gadgets and electronics are investments. However, these items naturally depreciate overtime. If you will look at it closely, you don’t invest in a good night’s sleep by buying an expensive pillow or invest in amusement by purchasing a brand new television. Sometimes, the word investment is overused especially by marketing companies in order to attract people to buy something that will deteriorate after several years of use. If you are thinking of investing your money, you need to set your financial goals straight. Also, you need to determine the type of venture you want to invest your money into. If you are a conservative investor, try saving money first in a bank account. This is the easiest way to invest because you are not losing any money. However, if you want a more advanced venture that will double or triple your capital, you can go for more volatile investments like stocks and real estates. Consult a financial adviser first, so that your investment will not turn to capital losses. speakdollar/investing-101-how-investments-work/
Posted on: Thu, 14 Nov 2013 20:01:29 +0000
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