What is Investing?
The legendary investor Warren Buffett defines investing as “…the process of laying out money now to receive more money in the future.”
In investing, you have to set your own goal. In here, your money will work for you depending on what type of investment vehicles you are using.
For example, you have $1,000 that is not part of your budget for food, utilities and other basic necessities. This money could bring you a lot of fruit of investment if you use it properly. Even if you only have $10 or $20 extra money every week, and you like it to put in an investment, this will bring you profit. Remember that if you do nothing with your money, your wealth will not grow as you expect it.
IDENTIFY WHAT KIND OF INVESTOR ARE YOU
Before you do investment, you need to answer the question, what kind of investor am I?. An online broker will ask you about our investment goals and how much risk you are willing to take on. This is important part as you will reflect on your self about your investment.
How to assess your risk appetite towards investment.
Step 1 – Think of how much you can afford to lose
Ask yourself what will happen if you lost some amount or even all of your money in your investment. You have to consider those people who depend on you financially and the other important financial commitments such as loans, rentals and other expenses. Remember that you should not put 100% of your money in investment because you also have different expenses.
Step 2 – Work out your goals and timings in investing
Before doing investing, you have to make clear about your goals. There are two kinds of it. The short-term and the long-term goals. The bigger your goal in relation to the assets or income you wish to invest, the greater the rate of return required to beat inflation and hit your goal.
You should know the term volatility risk in this part of your investing decision. Taking no volatility risk might make your goals impossible to achieve, taking too much might lose your investment.
Short-term goals are usually under five years. Best examples of this are buying cars or a purchasing new house. Having this short-term goal, your appetite for volatility risk would be low and cash products will be the best vehicle to invest.
However, you have to be aware that cash savings can not keeping up with rising price or the so called inflation risk.
On the other hand, long-term goal is all about putting your money into investments that have a better chance of giving you inflation-beating returns. Meaning to say, you can gain more or higher profit from this. If you choose long-term goal, you have to prepare yourself in taking volatility risk for the opportunity of higher returns.
Step 3 – Know your personal risk attitude towards investing
Risk attitude is something within you that controls your investing activities. The current events are very influential in this. For example, if the stock market direction is going up, we might feel comfortable with market risk. You will see your stocks value rising. But reversely, if the market is going down, you feel bad about it and feel fear of investing. It is normal because no one wants to lose money. Everyone want to have more money.
As an advice, you can put your money in different investment vehicles such as stocks, UITF, VUL, Mutual Fund and the likes.
ONLINE BROKERS FOR STOCK MARKET INVESTMENT
You cannot go to the stockmarket and find for a store to buy a stock. You have to find a broker or maybe use an online broker. Today that we are living in the age of internet, online brokers are available for our convenience. You do not have to go personally to their office to buy stocks.
As a beginner, here in our country, the best online broker for beginners is none other than the ETORO. For as low as $200, you can start buying stocks and trading it. But the advisable amount is $500. I personally use etoro and I found out that it is very easy to use and honestly it is profitable.
If you want to try etoro, open their website and signup here.
As a beginner, here in our country, the best online broker for beginners is none other than the ETORO. For as low as $200, you can start buying stocks and trading it. But the advisable amount is $500. I personally use etoro and I found out that it is very easy to use and honestly it is profitable.
If you want to try etoro, open their website and signup here.
Another good technology in etoro is the copy trading. Yes, even if you don’t have experience in stock trading, you can copy those expert in investing. Etoro is also a social media like facebook where you can communicate with other investors. You post and write comments in there. The minimum investment you need to copy them is $500. If they gain profit, you will gain profit too. If they lose, you will lose too. Simple logic.
The best thing to do before engaging in an online brokerage, you have to search first their reputation. Understand their commissions and know their background. Always remember that risk is always there. As I experience, the global pandemic hits the market. All stocks are going down. My online broker which is etoro set leverage in a low mode to avoid loses on the part of investors. Good thing for investors.
MUTUAL FUNDS
Aside from buying stocks, you can also invest your money in a mutual fund. A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.
UITF
UITF stands for Unit Investment Trust Fund. It is a curated investment fund managed by experts to ensure high yield and quality returns. It is the perfect investment option if you don’t have the time or knowledge for actual stock trading because there is an expert doing this for you.
SO WHAT IS THE DIFFERENCE BETWEEN MUTUAL FUND AND UITF?
The difference between Mutual Funds and UITF is that UITFs are offered by banks while Mutual Funds are their own companies. In buying UITF, you own units of this fund. In buying Mutual Fund, you own shares and become a shareholders of that company.
VUL
Another financial vehicle in our list is the VUL or Variable Universal Life. It is a type of permanent life insurance policy with a built-in savings component that
allows for the investment of the cash value. In this, you hit two bird in one stone. Why? While doing investment, you are insured. I personally have this kind of investment.
allows for the investment of the cash value. In this, you hit two bird in one stone. Why? While doing investment, you are insured. I personally have this kind of investment.
THE BOTTOM LINE
Do not rush your self in investing. Try to do some research about different investments and choose the best for you. According to the legendary Warren Buffett, there are two rules in investing. “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1” Yes, you have to be careful in investing your money. Do your best to avoid losing it by doing some research before investing. Risk always there. Your job is to protect your money and never forget those rules.
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