Invest Your Money, The ABCs
When figuring out how to invest money it’s best to start with the basics.
These basics include what the goal of investing is as well as where to invest money.
Investing money is either buying a portion of a company or a commodity with the belief that the value of that company or commodity will grow over time.
Investing is not a get-rich-quick scheme, but rather a way to consistently grow the wealth you already have.
The good news is that even though investing is a way to grow your wealth, you don’t have to have a lot of money to get started.
Where to Invest your Money?
When deciding where you should invest your money, you’ve got plenty of options, These options include:
1. The Stock Market
The most common and arguably most beneficial place for an investor to put their money is into the stock market.
buying a stock means: you will then own a small portion of the company you bought into.
If the company profits, they may pay you a portion of those profits in dividends based on how many shares of stock you own. When the value of the company grows over time, so do the price of the shares you own, meaning that you can sell them later for a profit.
2. Mutual Funds
Rather than buying a single stock, mutual funds enable you to buy a basket of stocks in one purchase.
The stocks in a mutual fund are typically chosen and managed by a mutual fund manager.
3. Savings Accounts
By far, the least risky way to invest your money is to put it in a savings account and allow it to collect interest.
However, usually, low risk means low returns.
The risk when putting your money into a savings account is negligible, and typically, there are little to no returns.
Still, saving accounts play a role in investing as they allow you to stockpile a risk-free sum of cash that you can use to purchase other investments or use in emergencies, so you don’t touch your other investments.
4. Physical Commodities
Physical commodities are investments that you physically own, such as gold or silver.
These physical commodities often serve as a safeguard against hard economic times.
Important things to look at when investing in a company
Management
One important factor to consider when analyzing the investment potential of a company is its management.
Companies live and die by the people who are running them, and you need to make sure that any company you invest in is managed by executives who are honest, talented, and determined.
Before you invest in a company, take the time to thoroughly familiarize yourself with its management, and make sure that you trust them to grow the company going forward.
Meaning: If you are going to invest in a company, it needs to have some sort of personal meaning to you.
There are a couple of reasons why this is important.
For one, you are more likely to understand companies that have meaning to you. This means: that you will be better able to analyze the future of the company.
Investing in a company that has meaning to you and that you believe in also makes you more likely to research the company and stay on top of what is happening with it – which, in the end, is a big part of being a successful investor.
the Second is a competitive advantage
It is difficult for competitors to come in and take away a portion of that company’s market share.
The Third is: Margin of Safety
The margin of Safety measures a company’s stock price compared to the true value of the company.
The Fourth is the difference between price and value
This is an important distinction, as a company’s stock price can vary wildly without their value ever being affected.
