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Investing, investing, investing– It’s surprising how this word carries so much prestige. You know how a friend will mention that they just began investing and in your head, you’re thinking they’ve hit a jackpot or something. Well, while some people have the prenotion that investment is only for those who’ve made it in life, the good news is that it’s not totally true. Anyone can invest irrespective of their financial standing. But how exactly does investment work and what are the basic things you should know before starting your investment journey? Your most daunting questions are answered in this article. Read on!
What does investment really mean?
Think of investment as something you go into now for future benefits. A good illustration is a college degree where you invest your time and resources with the hope of getting a degree which could be a ticket to landing your dream job. In the same way, to invest means that you commit your money to a financial asset, or security, such as a stock or bond, in hopes of receiving even more money later.
Why should I even bother investing?
Do you want to get rich or not? If your answer is yes, then you have good enough reason to invest. But, investment is not a get-rich-quick scheme. It requires a lot of patience as your returns compound over the years. When you give your money enough time to compound, the growth can become massive and you can smile to the bank.
I really can’t seem to get a hang of the investment jargons
You might find the investing terms confusing but as time goes on, you’ll get a grasp of it. Let’s have a look at some of the most commonly used investing terms:
Stocks and Bonds: A stock is a tiny share of ownership in a company while a bond is like a loan you give to a company with the promise of being paid back with an interest. A major difference is that bondholders have a higher chance of being repaid if the company is being liquidated. Also, stockholders have a voting right while bondholders don’t.
Portfolio: This simply refers to all the financial assets you own: stocks, bonds, commodities and the likes. This may also include assets like real estate which are not traded in the stock market.
Compound interest: This means taking the earnings from your investments and re-investing them to earn even more instead of using them for any other thing otherwise.
Stock indexes: These are indicators that measure and report the evolution of the market value of a group of stocks. They may also be known as stock market indexes.
How do I become a smart investor?
Investment requires risk and to be a smart investor, you need to know when to take these risks. This means you need to possess strong decision-making skills. Also, you need to set a goal for yourself and never invest the money you will need in the short term in a long term venture. Ultimately, Never invest in something you do not fully understand and in most cases, if an offer sounds too good to be true, you might want to hold off a bit till you are sure.
How do I start investing with little money?
There are various apps that help you begin a safe and secure investment journey with little money. Find them, and set your dreams of incurring wealth in motion.
