Investing your money is often seen as something risky. Most of us are so intimidated by the big investment “suits” that roam the world’s market places, that we think there’s no way of ever getting ahead of them. Of course, being a full time investment broker is not something many of us can expect to become, in the same way we’re not looking to becoming professional football stars, although we may play from time to time.
Exactly in the same way you think about football in this example, you can think about investing your money. You don’t have to be a professional to get something out of it. The best way to start thinking about investing is to think small. Secure investments are not the most profitable ones, but they’re very good to help you familiarize yourself with the market.
Of course, these secure investments are not 100% error proof as they’re still investments in a market that constantly fluctuates. On the other hand, if a market doesn’t fluctuate, meaning no money comes in or out, it is considered a dead market. This type of market doesn’t make any profit whatsoever.
So whenever you hear that the market fluctuates, you have to know that this means there is a lot of action going on, and in order to function properly, it has to be like this. Sure, there are instances where the market crashes, but as we’ve seen many times before, the economy is not something that will ever be completely stable. People buy and sell their products and services. Investors invest their money into the companies they think will make the best profit in the upcoming months or years. This is simply how the whole thing functions.
So where do you come into play in all of this? Well, you might not be the biggest player on the market when you first arrive, but you’re certainly part of the entire thing that’s called global economy. Once you invest your money into a certain company by buying their shares, you become part owner of the company. You may not have a voting right in the decisions the company makes (this is reserved for major shareholders), but you’re definitely on the list of people who are going to be paid if the company makes a profit.
Of course, buying and selling shares is not the only way to make money by investing. We will list some of the best ways to invest your money and hope that you’ll be more informed after reading this so you can start investing right away if you want to.
Shares and stocks
Since we’ve already mentioned this method of investing, we think it would be best to get it out of the way first. There are many different types of shares and stocks you can buy and sell. Standard shares are very straightforward in getting you a certain profit. You buy them at a low price; the company gets your money and uses it to make a profit. If they succeed, your shares are worth a bit more and you can sell them for that higher price.
Dividend shares and stocks are a bit different. If you own these kinds of stocks, the company shares their profits with you at the end of the year by paying you a dividend of the profits they made. Sometimes these dividends can be 2 percent, sometimes 3, depending on the decision of the board that leads the company. The best thing with these kinds of stocks and shares is the fact that you don’t have to sell your shares in order to get a profit.
Options are a bit more complex than stocks and shares but follow the same basic principle. An option is a legal document that binds a seller of the shares you want to buy to sell you the given shares at a certain price. If you, for example, buy an option for $30 to buy a stock of shares at a price of $200 in the next 3 months, and then 2 weeks later the stock of shares skyrocket to a worth of $1500, the seller is bound to the deal of your option and has to sell it to you for $200.
The opposite is also true. If the stock of shares drops to a low and is only worth $10, you have the option to buy it at a price of $200 or to let the deal expire. Of course, letting it expire won’t get you your initial $30 back you paid for the option, but it is still better than if you’d bought the stocks for $200 in the beginning.
Because of its more speculative nature, options are a bit riskier to invest in than stocks and shares, but that doesn’t mean you can’t handle a few easy trades once you get accustomed to the way the whole thing works.
One of the safer ways to invest your money is through investment bonds. This kind of investing is very safe but also very slow. Yes, you may see your money doubling after one and a half or two decades, but the question here is, can you really wait for so long? Awaiting the maturity of a bond is not for everyone, but it is certainly something worth considering in the long run. Zero-coupon bondholders have another big plus, which is that reinvestment risks virtually don’t exist.
Let the bank do the biding
Another safe thing you may consider is letting your money sit on a savings account in the bank. If you fear that investing into funds, shares, stocks or options might be over your head or too risky, then this type of investing is the thing for you. Many banks have warranties to a certain extent, so trusting them with smaller amounts may not be very profitable in terms of interest, but it certainly will let you sleep at night.
There are many ways to invest your money. It’s best to decide what kinds of risks you’re willing to take and how big of a loss you’re willing to take for those risks. From there, you can decide which type of investing is right for you.