I have to admit that I am not an expert on the subject of investing since I only started learning about it a few years ago and I still have a lot to learn. Having said that, I have started investing some time ago and I think I can give some helpful advice to people who are completely new to investing. We are going to cover absolute basics in this article and you can definitely reach out to me if you want to continue this discussion or if you would like me to write another article about my experience or about some more advanced investing tips.
What is investing?
Investing is a way of earning your money passively – without actually doing anything that is. It works like this: you give an amount of money to a company, bank, building, or even government (we will discuss some of these later) so that they can use that money for their business and earn even more money. Then, based on how much money they earned, you will get a bigger amount than what you have initially invested. It is pretty simple as a concept, but it gets trickier the deeper you get into it.
What kinds of investments are there?
People invest in all sorts of different things, but I will cover some of the most basic ones. First of all, we have shares – you buy a stake in a company, and as that company expands and earns more money your shares will grow. Then you have property investment which is basically investing in a building – you might earn money when the building is finished and apartments have been sold. Another way of investing is giving your money to the bank and having a savings account. You have to give a certain amount to the bank (or a smaller amount of money every month) and after a set number of years, you are able to withdraw your money with interest.
When people are new to investing the number one fear they have is that they will lose their money. This is a valid concern and you should know that investing comes with certain risks that are not really avoidable. If you invest a lot of money into a company and that company goes bankrupt, you will simply not get any money back and lose the money you invested. However, there are ways of staying safe when investing to a degree.
How to invest smartly?
I think that the number one rule of investing is: do not invest more than you are prepared to lose. You should invest only the amount of money that you do not really need. If you have some savings and you are prepared to start investing, make sure to have enough money so that you can cover all of your expenses even if your investment fails. I would definitely not invest all of my savings, even if I am 100% sure that the investment is good. Start small, and find the best type of investments for you.