Investing allows you to bring satisfactory profits compared to, for example, a bank deposit or a savings account. Both wealthy people and people who invest only small amounts decide to take such action. Regardless of what financial resources we are talking about, you need to have a solid knowledge of modern financial markets. Knowledge of the rules for trading in investment instruments does not guarantee one hundred percent success, but it significantly increases the chances of attractive earnings.
What should an investing guide include?
There is no perfect guide to investing. Nevertheless, it is possible to point out aspects that should be mastered by anyone whose goal is conscious investing. The issues that need to be mastered include, among others, such areas of knowledge as:
- Principles of investing, or what is investing in individual asset categories?
- What can you invest your money in if you are concerned about high risk?
- investment risk.
Principles of investing, i.e. what are the types of financial investments?
A modern investor has a choice of various types of financial investments. These include, among others, solutions such as:
- Shares – these are securities that give holders (shareholders) the right to decide on the fate of the company by participating in the general meeting. In the case of individual investors, however, shares are most often traded speculatively, and the source of income is the sale at a price higher than the purchase price and commission,
- ETFs, i.e. securities whose price is strictly dependent on the quotations of the “main index”. Such an underlying object may be, for example, the price of a selected raw material (gold, lithium, crude oil) or the quotations of companies from a given sector, country or stock market index,
- futures contracts.
Are there safe ways to invest money?
There is no such financial investment vehicle that does not involve any risk. Fortunately, there are solutions available on the modern market where the risk of losing capital is minimal. These include State Treasury bonds. Interestingly, they give a chance for relatively high interest rates. This is especially the case with inflation-indexed bonds – in this case, the higher the annual rate of return in the economy, the higher the rate of increase in the prices of goods and services in the economy.
Investment risk and profitability
Usually, the relationship is as follows: the higher the potential return on investment, the more serious the risk of losing some or even all of the invested capital. For example, bonds give a lower potential rate of return than shares, but it is the latter that means the possibility of achieving a rate of return of several or even several dozen percent.
On the other hand, alternative investments give a chance for exceptionally high earnings – these include, for example, cryptocurrencies (virtual currencies). In this case, however, it should be remembered that trading in alternative instruments usually takes place on unregulated markets, and the instruments themselves are characterized by a much higher level of price volatility. As a result, it may turn out that in a short period of time the value of a given asset has fallen by up to several dozen percent.
Learning to invest
Learning to invest should primarily include learning concepts strictly related to the financial market. In addition, you should also take care of the practical element, i.e. simply… investing on your own (at the beginning, it is best to allocate small amounts for investments).
Such action will allow not only to use theoretical knowledge in practice, but also – which is equally important – to check how a novice investor copes with stress and pressure. Contrary to appearances, the psychological factor is an essential element when investing, and lack of preparation can lead to panic on the stock market and making irrational, and thus – also costly – decisions.