Beginners guide to investing - the journey to your financial freedom needs to start with the first saving-wise steps.
You have probably heard about investing in shares, equity, commodities and investment risks?
It can all seem really overwhelming, as one concept blurs into the next, until you finally give up pursuing and hopefully ultimately taking charge of your financial education and freedom.
Don't give up!
With a little research, a beginners guide to investing, some patience and a willingness to extend your mindset, you can and must look into ways to invest money, the compound interest formula and even teaching personal finance.
Take a step in beginners investing and gain a little clarity - it'll go a long way to motivating and encouraging you.
BEGINNERS GUIDE TO INVESTING
It is very important to accept, from the very beginning, that any kind of investing, even investing through a financial broker, involves some kind of risk.
So make sure that you are aware of the risks involved before you commit to investing your hard earned money.
Basically when it comes to investing your money, you have the potential to make money in the following ways;
You could choose to lend your money to financial institutions, big companies or even governments and you will be paid a percentage in interest on the money you invested .
You could invest in commercial, residential or industrial properties and look at financing investment properties where you will make money in rental income and potential capital growth.
Another way that you can make money is by investing in shares and then by sharing the dividends or profits that are paid out at certain time intervals(to yourself and the other shareholders who have invested in the ownership investment). You can also benefit from capital growth.
The next step in a beginners guide to investing that you need to understand is the different asset classes that there are when it comes to a beginners-guide-to-investing.
Typically a low investment risk in bank savings, fixed term deposits and money markets .
You lend your money to a bank for a fixed period of time and they pay you a fixed interest.
You get paid interest on the money you invest.
Typically a low to medium risk that includes investments in residential, commercial and industrial properties or instruments.
If you choose to invest in property unit trusts, then you will invest smaller amounts of money in companies specializing in property investments.
You can also opt to invest in property syndications where you will collectively pool your money with other investors and then buy property.
You aim to make your money from rental income and from potential capital growth.
Typically a medium risk where loans are made to governments and companies.
You aim to make your money from interest earned and potential capital gains (and hopefully not losses).
You will lend your money to governments or even big companies who need money, for example, to finance future growth or infrastructure development.
The company or government bond is a certificate given to you by the government or big company when you lend them your money.
The bonds are issued in a primary market and then sold / bought by investors in a secondary bond or capital market.
This is a very complex process and it needs a high level of experience and investment know-how ... not for a beginners guide to investing.
Typically medium to high risks where you invest in listed companies on a stock exchange. (Investing in unlisted companies is typically a high risk investment).
Basically, you buy a part of a share in a business - so you have a share ownership.
Because you have a share ownership, you will hopefully share the profit(dividend) that the business or company makes (and possibly the loss too - so be careful).
Companies sell their shares to get more money, for example, expansion or other investment ventures.
The share prices will go up or down based on what investors see as the future potential profits / losses for the company.
You, as a shareholder will buy / sell your shares accordingly.
Say, for instance, investors generally feel that a company is going to make a big future profit. Then lots of people want to get on board to buy shares and so the price of the shares will go up.
It is probably a good idea for you to buy shares when they are cheaper and then sell when the prices have gone up.
(Now for some jargon ... a bull market is when the share market is generally going up and a bear market is when the share market is generally going down)
A beginners guide to investing ... and being a beginner in investing ... can make investing directly in bonds and shares overwhelming and risky.
The reasons are that you generally need a significant amount of money; you may not know enough or be able to research comprehensively enough to look at all the companies and bonds and you will have to buy a lot of diverse shares to minimize or spread your investment risk.
However, keep learning, keep reading, get advice from professionals or a knowledgeable financial mentor ... do whatever you need to do to wisely and prudently start taking control of your financial freedom and education.
There is nothing quite as empowering.