Often our picture of investors are wealthy businessmen who have several homes and a large supply of cash. We imagine that only the very wealthy can afford to invest as there is a risk that the average person would not be able to accept.
Investing after all is a risky business right?
Investing – Making the right steps
That image of an investor is not accurate as they are varying types of investments.
Investment is money that is expected to produce income or profit. Investments can be broken into several areas but the focus of this article will be on ownership or owning stocks in a company.
Stocks are literally certificates that say you own a portion of a company. When you buy one of these investments, you have a right to a portion of a company’s value .
Your expectation of profit is realized by how the market values the asset you own the rights to. You can use a stock broker to purchase stocks of any company which is listed publicly. An investor who wants this type of investment does not need to be wealthy. A start up cost is required but there are various options for the avid investor.
What about the risks?
Well there is a risk as you can lose money on the stock market. However there are things that you can do to minimize the risks.
Determine Your Needs
It is important that you determine about how quickly you will need to be able to access your funds. How likely are you to have to withdraw it again after you have invested the funds? Some investments are easier to access or convert into cash than others.
Risk only what you can afford to Lose
If you only have a little money to invest each month that’s actually a good thing. That $5000 a month leaving your bank account on payday that you barely notice will add up to $60,000 a year, plus your return on the investment. Starting small also helps you get used to investing and how it works, and will quickly reveal your comfort with risk.
So how do you decide where to invest your money?
Do your homework. Spend some time learning about different investment forms and how they perform, minimum investment required and so on. Some mutual funds will waive or reduce their initial investment requirement if you make regular deposits. Find out how each investment has performed in the last year, five years, and ten or more years.
So should you invest?
In these times, it makes sense to have long term plans about how to grow your money with minimal effort. The typical investor might very well be you! Anyone who wants to increase their saving portfolio and is willing to do the research is a potential investor!
What’s your take? Let me hear from you!