How to Invest Your Money: Introduction

One of the greatest sights in the world of finance that we have is the stock market. This has always been the top icon of the possibilities to make money and become a millionaire.

In this introduction to the investments I will try to explain in a simple way how the official system to an ordinary individual.

This article is not about making money and become a millionaire but to explain certain terms on this phenomenon.

What counts as an investment

What is an investment?

“… It is the act of having money or capital in an enterprise with the expectation of profit” as Princeton University.

When you make an investment this money is likely to win or lose money, but there is always the expectation that they will earn. The biggest mistake that people comment on when they start investing in stocks is to invest more than they should. You have to keep in mind that you should only invest what you are willing to lose. The investment is only one set of legal gambling.

Becomes saving investment

As you have already read several times in articles and on the page about who we are, my duty as a financial advisor and a friend is to teach different forms the basis of all financial health, saving. When you save you should have several funds to better identify who could invest money.

Remember that the first thing you should save it for an emergency fund. After you have enough money for the unexpected you could start an investment fund.

Understanding stocks and shares

What is a stock?

Imagine that a company is divided like a cake (cake, cake) in many equal pieces. These pieces are called shares and if you have a piece you own a part of the company, or shareholder. The majority of companies that are in the stock market are split into thousands of pieces, this means that even if you are owner of the company did not have any say (unless you have many pieces). If the value of the company increases, your piece will be worth more and if less low. Here’s an example:

If you buy a stock that is now worth $ 10, this becomes an action regardless of price. If the stock is worth $ 20 tomorrow, you will have $ 20. If the stock has a $ 1, you lose 90% of your initial investment.

Weighing up risk and return

The relationship between risk and return (you earn)

The most important point you need to know about investing is the positive relationship between the risk you take and the gain you get from your investment (performance). The more risk you have of losing money, the more money you could win (or lose).

What happens in the stock market?

In the stock market is where companies and individuals have the opportunity to buy and sell these pieces (shares) of the company. Ordinary people usually do not buy the shares of the company through the company if a third party (broker).

The value of the business changes in relation to how well the company is doing and will do in the future also. If the company does poorly, chances are that your actions price reduction.

Summary

This article introduces basic investment concepts, explaining what an investment is, why it’s risky to invest more than you can afford to lose, and the importance of building savings and an emergency fund before investing. It also explains what a stock or share represents, the relationship between risk and potential return, and how buying and selling shares works on the stock market.

Questions this article raises

• How much should a beginner have saved before starting to invest?
• Is investing in individual stocks riskier than a fund?
• How do brokers typically charge for buying and selling shares?