Investing your hard-earned cash into financial markets represent the right step forward towards attaining financial security and success. Yet while it sounds like a simple process of buying assets low and selling them high, investing can be deceptively more complex than what it superficially seems. Here are five things every aspiring investor should know before throwing their wads of cash into the ring:
Investing Involves Risk
There are clear lines separating gambling from investing, but perhaps a similarity that these two activities share is the element of risk. Albeit relatively lower than poker or slots, you still risk of losing money when you invest in financial assets, like stocks, commodities, and currencies.
Investing is More Than Just Stocks
When people talk about investing, the stock market is usually next to be mentioned. While a lot of investors have been able to pocket profits from their stock investing ventures, keep in mind that it’s not the only place you can park your cash for growth. IRAs and Roth IRAs are examples of investment assets that you can and should take advantage of. That being said, learn the difference between an IRA and a Roth IRA before investing in either of them.
Investing is Long-Term
It’s not a get-rich-quick scheme that you can show off to neighbors and friends the very next week after making your first serious investment. Investing doesn’t just mean one big investment made over a short period of time, but rather a string of investment positions that make you money over time.
Investing Requires Money
Although investing does involve a layer of complexity, it’s not rocket science. But just like launching rockets into space, you need a serious amount of cash to successfully pull it off. Investing with $100 will likely lead to over-investing or what’s known as trading. Your account should have at least $1,000; any amount smaller than that will force you to overcompensate with bad short-term trades.
Investing is a Solitary Sport
Don’t make investing a social activity wherein you try and ask every friend, family member, or coworker about where you should be investing your money. Moreover, avoid absorbing every Wall Street Journal article or post on Bloomberg and interpreting it as a sign to either buy or sell.
When you start investing, keep things simple. Look for companies that have value and who you are familiar with. And above all else, practice sound risk management techniques.
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