If you are thinking about investing, then there are a few things to keep in mind before getting into it.
Understanding investing is fairly simple. It basically means you are letting your money do the work for you. There are several ways that you can invest from stocks, bonds, real estate, etc plus more. Whichever method you decide on, the goal is to make a profit from the money you initially put in.
Now, while there is a certain amount of risk that comes with investing, that risk can be lowered by doing real research before investing any money at all. It is not recommended to invest your money without looking into it first. Now, let’s look into the different types of things you can invest in.
A stock is simply the amount of capital that is raised by a company through shares. When you invest in stocks, you are investing in a specific business or corporation.
If you are leaning towards investing in stocks, you’ll want to set apart a percentage. You also should be mentally prepared to risk it all and potentially lose out. Always involve a financial adviser, especially if you are a first time investor. Your adviser can help you decide how much to set aside so that you can safely invest in the stock of your choosing.
The best way to begin investing in stock is a little at a time. Don’t throw your life savings into a stock only to have it plummet the next day. Stocks can be vicarious and at times, unstable. Do the research, make sure the stock is legitimate, stable and well known and then invest a small amount that would not leave you bankrupt should you lose it.
Investing in commercial real estate is a little different. Usually it is a real estate investment trust. So if you are wondering how to invest in REITs, you must consider this criteria:
- Future growth and earnings
- Possible return on the price change
- The quality of management and the structure at corporate level.
- Other assets of the real estate or mortgage
One of the main benefits of investing in an REIT is that they can play a major part in retirement savings. Almost half of REIT shares are being held in either pension or retirement plans. So if you want to know why invest in REITs, that’s the best reason.
A bond is much like an IOU. It is known as a debt security. Bonds are issued in order to raise money from any investors who are able to lend money for a time. Whenever someone buys a bond, they are actually lending money to the corporation.
Bonds are probably the most confusing to understand but I will try to break it down a little. Bonds are usually repaid with interest but the problem with them is the price risk. That is when the value of the bond declines, the amount that you get back could be less than what you paid into it.
Mutual funds are another way to invest. It’s a program that is funded through the actual shareholders. They trade holdings professionally.
A mutual fund is something that you buy more than invest in. They are usually found within a 401k plan but it’s not necessary to have one to invest. Never put all your eggs in one basket when it comes to mutual funds. Ensure that your portfolio is diverse by mixing in bonds and stocks both domestic and international.
This is about as broken down and simplified as investing can get. Before even considering investing it is highly recommended to fully research all the different types of things that you can invest in as well as the best way to do it. As mentioned earlier, obtaining a professional financial adviser is the best step to make first of all, they can help from there in any further steps. Ask yourself ‘should I invest in property or a company’ and that will also help you narrow down your options. More info like this.