Investing in the stock market is becoming more popular nowadays. It seems that everyone in the world has some kind of understanding of the markets and of some kind of investing or trading system. For many people, investing has become a hobby. When you invest as your hobby, you can find yourself in a different world. The entire thing becomes fun!
Stocks, bonds, and mutual funds. These are where you’ll find your investments happening at first. In the case of stocks, you’ll purchase stocks for companies that are listed on stock exchanges, and, just like other investments, you will need to buy stocks in companies that have good earnings for a long period of time.
Remember: Investing is different from trading, and if you’re not already an expert, you’ll want to stay away from the trading side of things until you gain more experience.
As for bonds, you’ll be looking at an entirely different type of investment.. Bonds are generally considered riskier investments than stocks. But that, of course, depends on what stocks you’re talking about.
According to Investopedia.com, “A bond is simply a loan taken out by a company. Instead of going to a bank, the company gets the money from investors who buy its bonds. In exchange for the capital, the company pays an interest coupon—the annual interest rate paid on a bond, expressed as a percentage of the face value. The company pays the interest at predetermined intervals—usually annually or semiannually—and returns the principal on the maturity date, ending the loan.”
So, with a bond we are investing in a company, but in a different manner than a simple stock purchase.
Mutual funds are a type of investment that involves investing in stocks, bonds, and other financial assets, but in a group that is managed by a “money manager”. It is a type of “pool” arrangement. Your “yield” with a mutual fund may be somewhat less than with a pure stock buy. However, since the assets in a mutual fund are more diversified, it is usually considered a safer investment.
There is no guarantee that if you invest in bonds and mutual funds, you will never face problems. There is always risk in investment of any type. Investing in mutual funds, bonds, and stocks has proven to be a reliable path to wealth over the long term.
To Make All This Clear…
If you’re investing in stocks, you are buying shares in a company that is listed on a stock exchange.
If you’re investing in bonds, you are providing capital to a company, or entity (like a city, state, or even federal government), that is promising repayment plus interest, with interest dividends paid along the way.
If you’re investing in mutual funds, you are placing your money into a “pool” of capital that will invest or divest assets… stocks, bonds, or other mutual funds… at the direction of that fund’s “money manager”.
At any rate, to begin, you will need to take stock (pardon the pun) of which type of investment is right for you. You need to decide just where you are, and factor in how much risk you are willing to carry in relation to how much return you need to get… and when. Those are all decisions you need to discuss with a good financial manager.
Keep in mind that investing is a habit. It is a way of life. No matter how long you’ve been invested in stocks, you will still need to learn about the different new stocks out there. It is wise to know about everything because investing is not something that you can just skip over after you’ve made the first few millions.
In the long run, investing is all about timing. Knowing when is the best time to invest, and when is the best time to DIS-invest (sell) is the key to the game. In other words, investing is for those who know when they can invest, and when they need to wait.
Once you’ve found the right timing, and the right instrument, you can be sure that you are investing correctly. Just remember to learn about the different stocks that are available. Investing is definitely a fun hobby, but success only comes with experience.