Becoming an investor is a step by step process. Just like learning a new language, you need to start with the basics. When the essentials have been grasped and the knowledge has been put to practice, only then can you build an investment portfolio that will help you build wealth and achieve your long term goals.
To assist you on that journey, here is a look at the most common types of investments.
TYPES OF INVESTMENTS
The basics of investing starts with the various methods an investor may employ to make money. It is important to have a variety of investments, but the key to sustaining the balance and growth is to understand both the pros and cons of the options. 카지노사이트
Savings Accounts
A savings account is the most basic of investment options. Usually provided by any bank, it offers the lowest returns among other investments. While many consider a savings account the best option for easy liquid access, it is advised to keep only the amount required for day to day needs in a savings account.
Other liquidity needs can be taken care of by investing in liquid mutual funds that offer superior returns.
Stock
It’s proven historically, that owning stocks is the best way to build your wealth, as they provide the highest returns. Buying stocks means that you are gaining a tiny part of a business. Profits come through in the form of dividends or when you sell your share for more than you’ve paid. If the price of your stock goes up it’s a money maker. If on the other hand the price plummets, you’ve lost the bet.
Many investors shy away from this asset class due to high volatility and the risks involved. However, with proper knowledge and
Mutual Funds
Mutual Funds are often touted as the best investment option for beginners as they are easy to understand, give you a route to invest into stocks and are handled by professional money managers. Buying one means that you and a number of people have clubbed resources to invest in certain securities. 안전한카지노사이트
Mutual funds show profits in a number of ways. The cash could come in through interest, dividends or even capital gains. Though mutual funds are credited due to the ease and the promise of expert advice, they do have some drawbacks to consider.
Mutual funds are prone to risk and give no assurance of returns. There’s often an additional fee and they have also been criticized for incompetent or dishonest management.
Bonds
Buying a bond means you have lent your cash to a company, which will pay it back with a pre-determined interest after a set period of time.
The big selling point with bonds is the no risk factor. On the downside though, the relative safety means a low rate of return.
Real Estate
There are many ways to earn money through a real estate investment. Be it from buying a property for renting or buying a real estate investment trust (REIT). Many people believe real estate to be a good investment. However, it is one of the most illiquid and returns often pale in comparison to equities.
INVESTMENT CONCEPTS
So now you know your options, it’s on to phase two of investment basics. There are certain concepts an investor must fully grasp. Only then can you combine these theories to devise a plan which works for you.
Risk-Return
This basic investing concept states that high risk investments are always likely to give better returns. The general belief is that a safety blanket investment will help you sleep at night, but won’t offer much more in terms of potential profits.
While the promise of ‘high risk, high return’ is bound to be alluring, it is essential to first determine your risk tolerance threshold. Only then can you be guaranteed an investment process devoid of stress.
Diversification
Diversification is a key concept when it comes to the basics of investments. What it means is that it’s extremely important to blend an assortment of investments to best safeguard your cash.
While certain investments are likely to outshine others, it is the mix within that helps balance out the low performers.
Those who grasp this concept spread out their money into various funds, stocks and bonds. An often used strategy in diversification is also of investing in foreign stocks. This helps because it is unlikely that what affects one economy will affect another. 카지노사이트 추천
Portfolio
A portfolio is your personal collection of assets and investments. Stocks, MFs, Gold, real estate, valuable heirlooms, they can all be viewed as a part of your portfolio.
The kind of portfolio you have comes down to your risk tolerance and goal-oriented timeframes.
It is, however, important to regularly analyze your investments, so that you can throw out the under achievers. This way you can maintain a profitable basic investment portfolio.
Accounts you will need
To buy and sell stocks online, you need to have 3 essentials in place. First, is a demat account. Second is a trading account. And, third is an online banking account, that will be linked with your trading account and enable you to make payment for the purchase of securities, and to receive payment for any sale of securities.
Demat Account
A demat account serves as a repository of the securities you have bought or sold. It is just like a bank savings account. Just as you keep your money in a savings account, you keep the shares that you own in a demat account. When you buy or sell shares they are reflected electronically in your demat account just as a cash transaction would reflect in your bank account.
Trading account
Trading account is that mechanism that helps you to transact in shares & other securities, online. It is also sometimes referred to as an online investing account.
Once you’re clear on the investment basics, you’re ready to pave the way for investment success.