When it comes to investing, many first-time investors want to jump right in. Too often, we see these same people start investing with the dream of getting rich overnight. Sure this is possible, but it is also rare, as very few of these investors are successful. So, as you can see, this mentality is usually a very bad idea to start with.
Now, if you really want to set up long-term investing for some later life events, such as funding a college education, buying a home, or retiring, you have a couple of options to choose from. However, before you look at that, consider the following. The problem is that it seems that many people are not getting to the main reason behind investing.
The main reason for investing is to make money with as little work as possible. So, to most people, this looks like easy money or passive income. Guess what, it’s not that easy or passive. It takes work and time. So keep this in mind when considering how you want to invest in life.
So, before we begin, let’s look at how it all works. First, please understand that there are many different methods of investing. Now keep in mind that you don’t have to invest in high-risk stocks and risk all your hard-earned money if you don’t want to. You can just as easily invest your money in very safe ways that will generate decent returns over a long period of time.
One such method is bonded. Bond certificates are similar to certificates of deposit. But bonds are not issued by banks, but by the government.
Now there are different types of bonds you can buy, so depending on the type of bond certificates you buy, your initial investment could double or more over a period of time. So if you’re not quite ready to take the risks associated with mutual funds or stocks, at least you can invest in bond certificates that are guaranteed by the government.
Then we have mutual funds. Mutual funds are somewhat riskier than bond certificates, but for the most part, are still relatively safe. Mutual funds usually exist when a group of investors collectively place their money to buy stocks, bonds, or other investments. This can sort of offset the risk of investing on your own.
Finally, there are stocks. Stocks, of course, are even riskier than mutual funds. However, stocks are a different vehicle for long-term risk-tolerant investments. Basically, stocks are ownership stakes in the company in which you invest. So, when a company is financially successful, the value of its stock increases. On the other hand, if the company does poorly, the value of its shares goes down. Therefore, when buying stocks, be sure to choose well-established stocks.
So, what to do to start investing. Understand that investing requires more than just calling a broker and telling them you want to buy a stock or bond right now. So, before you invest a penny, really think about what you hope to achieve with your investment.