The Basics of Investing
Investment
is something that almost everyone will want to do. Cementing an income after
you retire and enjoy the fruits of your hard work is something that many will
like to enjoy. There are those who would like to drive expensive cars, travel
around the world, and purchase the luxury house and many other things. All
these are possible if only you will save and invest. There are basics of investing that you
need to be aware of for you achieve all these.
Power of Investing
The
power of investing lies in your own hands. It involves setting aside cash which
will be working for you in form of investment. For you to have successful
investment, you have to commit yourself and regularly set aside and this should
go hand in hand with the best investment option which is based on the goals
that you would like to achieve,. You also have to be aware that when you
invest, you are taking some risks. Investment is committing your cash in a
long-term expecting e reasonable income in future.
Establish a good Foundation
A
health foundation starts you calculating the amount that you will be saving and
that which you spend. This will bring you to having a budget which you will
have to work with it. Have a budget that clearly shows your salary, your
expenses and the savings that you will be making. The less your expense are than
your income, the better! After your budget is ready, edit it so that you come
up with the best budget that will help you to save. From this budget, you
should be able to set your goals. Use Financial Goals Worksheet to list your
goal. Let them be accurate and measurable.
Investment Classes
There
are three classes of investment. There are:
Stocks- A stock is a percentage that you will
have in a corporation. From stocks, you will be able to buy shares and you will
make money from dividend payments.
Bonds- Another form of investment. With
bonds, you give the bond issuer you money and then you are paid interest. This
is just like the way you normally pay the creditor his interest. With this
investment you will make money from interest payments and purchasing of bond
less than its value. After the maturity of the bond, you will be able to get
your principal cash.
Term Deposit or Cash equivalents-These are assets that are
easily converted into cash. In most cases cash equivalents have got little or
no danger and if not they have got low risk. Though they provide low returns,
they are safe.
Risk management
Diversification
means you have to invest your cash in different aspects of investment. You
don’t have to invest in one company alone. If company A makes a loss, the other
investment that you have done in other companies will not be affected largely
because the other companies are likely to make profits.
Research and Purchasing
Research
is very important when you want to invest, and it is probably the number 1 of the basics of investing rules. It is better you do a personal
research and also get advice from a professional before you decide which
investment to buy. Read books about stocks, bonds and gather any necessary
information regarding the investment you would like to make.
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