Investing for beginners is a passion project for Invest With Passion. After all, it is these beginning investing explorers that we serve. This page is dedicated to plunging out the basics of investing so you are able to start on your journey to financial independence.
The Invest for Beginners Series
It is recommended that you start with our Beginning Investing section before you start down the journey presented here. There is some basic psychology that you is important to investing that is critical for beginners to take in. So, if you haven’t read that material yet, please do so now. See the beginning investing section.
Inside this series, we will focus on the multitude of investment options that you have as you begin this journey. They range from conservative to very risky, but we believe it is important for you to see the options before you. Don’t be intimidated at the list or even the jargon that is used as you may be new to all of this.
Surely over time you will have an opportunity to develop, study and research the definition of these words and the context they are used in an investing environment. Everything depends is one of the first lessons you will be forced to learned in the world of investing. Nothing is certain, but with diligence and research you can come to make some very concrete decisions.
But enough of the set up, let’s get into some particulars and lessons.
What is Investing?
According to Investopedia, investing is:
It’s actually pretty simple: investing means putting your money to work for you. Essentially, it’s a different way to think about how to make money.
We couldn’t agree more with this assessment of investing. Most of us grew up believing that the only way to earn a living in this world is to work for it. Only this didn’t mean working intelligently investing your money, it mean physically trading your time for money. The more you do the more money you make.
The problem with this scenario is that if you are not working, you are not maximizing your earning potential. You are in the case of trading dollars for earnings. But there is a different model out there that we think you should explore.
Put Money to Work for You
Investing is about putting money to work for you. There are several ways to make this happen and we will discuss a few with you. But think about this for a moment. What if there was a way for you take all those hard earned dollars you trade your time for were able to work for you. Like little soldiers, each dollar works day and night to bring back $1.20. That is called a 20% return and if you follow us through this course, you will understand why that is a killer return.
Inside Compound Interest and this 20% return
Let’s continue this dream of getting a 20% return on your investment. If you had $100 dollars to invest and it was earning 20%, at the end of the first period you would then have $120. As mentioned above, this is great. Now that you have $120, we have to add 20% to that, so your total after the second period would be $144. After the third period, you would have $172.8, but it doesn’t stop there. After only the fourth period, the total earned is $207.36. As you can see you money has doubled in a short period of time, but the great part is that this was all a passive investment that you set up to earn for you.
The money begins to increase rather quickly after this moment as the principal has almost doubled in a short period of time. This is the situation that most investors are seeking with their investments. As mentioned, a 20% return is killer and you probably will struggle to reach those numbers without taking on substantial risk to your portfolio.
Different Ways of Investing for Beginners
At the beginning of your investing career, it is suggested that you get familiar with all the different types of investment vehicles. With that, let’s take a look at some of the more popular investing options for beginners and see w hat we can find that you might be more interested in. This way, you will be able to do further research on the site to find out more about these topics and how to start investing your hard earn money for returns like the example above.
Stocks
The stock market is probably the first investment vehicle that comes to mind when you think about investing, but it isn’t the last one. The stock market gives regular people the opportunity to invest their money into larger publicly traded companies. If a company sells a product or is in an industry that you like, you can purchase shares of that company and share in the good fortune it brings. Warning, if this company that you purchase shares in loses their money, your shares can and will become worthless depending on the outcome.
Bonds
The bond market is one that has very high interest for IWP over the last few months as many investors fear that it might not be such a great investment opportunity. But the bond market basically allows large companies and governmental entities to borrow money from you and pay you back at a guaranteed interest rate. These interest rates are typically a lot lower than the rates of return you can get in the stock market, but typically carry a lot less risk as well. Nothing moves quickly in the bond market, but investors seeking this type of action is not really looking to make fast cash, but something slow and steady.Mutual Funds
Forex Market
The forex market is the wonderful world of currency trading. This is a highly volatile environment and not for the faint of heart, but carrys a large capacity for gain. Betting on currency is not something that we would suggest to beginners, but if you must then be sure to do the proper homework on the countries whom currency you will be betting your hard earn money on.
Precious Metals
Many people prefer investing in something that is tangible and precious metals tend to be this alternative. This includes things like gold, silver, platinum and more. These metals have investing value just like the stock market and the price fluctuates depending on who is willing to pay what per ounce. Just like the currency market, this is a very dangerous environment if you don’t have the time of funds to stay in this market. Gold has reached its highest numbers in years compared to the dollar, but then again, this cold be because of the decline of the American dollar over the past few years. Be sure to do your research before risking your investing dollars.
Hedge Funds
Hedge fund investing is one of the more exciting niches in the the field of investing. Maybe this is not the perfect place for beginning investing, but it is a place for those with high net worth and liquid cash to play and get rich if they have the stomach for it.
According to Investopedia, a hedge fund is:
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).
Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.
Real Estate
Real estate investing is something that every investor must take into consideration. They say most millionaires make their money in real estate or once they make their money it is moved into real estate. Either way you see it, the end result is these people end up in real estate as a means to maintain their cash flow and appreciating assets.
Now, the real estate market has been hit hard over the last few years in the midst of this economic decline, but many experts believe it is now that you should be investing in this fallen investment vehicle. And with that, we want to cover a few of the various ways to begin investing in real estate.
When it comes to investing in real estate, the question quickly becomes do you want to be an active or passive investor because there are some major differences between the two. Active investors are involved in the day to day investment decisions and taking care of the properties or instruments involved. A passive investor is more like investing in the stock market and watching the income or losses pile up. Obviously, you would like to see more money coming into your financial investing situation that going out.
The choices to investing in real estate range from rental property, flipping properties, commercial investing, short sales, foreclosures, loaning funds to investors, private money, leasing, property management and more if you can believe it. There are no shortage of opportunities and things to select from depending on your aversion to risk and the amount of money and credit that you might have.
Businesses
The last area we are going to cover when it comes to investing is businesses. Yes, the stock markets allow you a chance to start investing in larger corporations by purchasing their stocks from their company. However, starting your own business allows you talk in all the advantages of profit, write offs, and taxes that come along with owning a business. There is nothing like it.
Yet you should not be misled to think this is a passive investment decision. Running a business takes a lot of hard work and time to get it up, running, and earning some cash flow in order to support your family and lifestyle. If putting in the daily hours it takes building relationships and working inside of the company doesn’t interest you, then maybe you should take a look at some other potential options for investing your time, energy and money.
Maybe you should fund a business. Find something that you like, believe in, and do some research. There are always entrepreneurs out there that are interested in looking for investing partners, beinners or specialist, that can and are willing to put money into their business for an equity position in the company. Just be sure to do your research and homework before investing.
Conclusion: Investing for Beginners
As you can see there is a lot to investing for beginners and really anyone that is interested in getting started. You must be diligent in your education gathering because what you don’t know could cost you a fortune, just as what you do know could make you one. The running theme through all these sections have been you doing your research and studying your business, craft, and investment opportunity. Don’t neglect this step for it is the most important.
When it comes to personal finance investing, the investment of your personal money, investing for beginners page of Invest With Passion is just the beginning, but a great step to securing your financial future.
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