Are you pursuing the real financial freedom? There is no better way to multiply your money than making smart investments. It doesn’t matter whether you have a thousand or a million dollars to invest, the rules are the same and we are going to explain them in plain words.
As they say: no pain – no gain. The same is fair for investing, as there is no such thing as overnight financial success: investing requires analysis, thorough work and pretty good knowledge of investing rules. Before making decisions about your money, make sure you clearly realize what the risks of the venture are and what rewards you may expect in short and long terms.
If you are not sure what’s best for you – savings or investing – read here a brilliant and simple explanation. There you will find a brief description of main investment’s terms, like liquidity, asset allocation, mutual funds, etc.
Here are your 7 golden rules when it comes to investments:
- Don’t let anyone, whether it’s a trustworthy bank or well-known investments expert put your money into the field you know nothing about. You have to understand at least the basics of the sphere and the schemes it works on.
- Don’t fall for quick a high profit. If it sounds too good to be true – it’s highly probably a fraud. This principle is the key one which legendary Warren Buffet uses. Say “no” to overly attractive promises.
- Know the real picture. Evaluate the current value and the potential value of what you are investing into.
- Don’t invest the money into high-risk assets if you are not ready to lose that amount. First, make enough savings which are steady and always within reach. In case you will lose your investments you will not go broke and you will still be able to pay for the lifestyle you are used to.
- Differentiate your investments. Remember the saying about not putting all eggs in one basket? It was actually said about investments as if the certain venture goes bust you will not lose all you money.
- Never borrow the money with the purpose to invest them. Of course, this advice is only for beginners, as professional and experienced investors use borrowed money very often.
- Don’t invest the big amount of money in long-terms projects, especially if that money will not be available for withdrawal in case of an urgent need. Needless to say, but if you are a beginner in investing, you better start with the low-risk investments. Read here about ways of investing money with the lowest risk.
There are several main fields where private individuals invest their money. Here is the brief description.
Bonds are safe, fixed-income investment with a relatively low return. It’s a great option for beginners and those who are not willing to risk their money.
Stocks and Mutual funds
Stocks are highly volatile financial assets so it is considered a high-risk (and potentially high-yield) investment. Mutual funds allow many individuals with relatively small amounts of money cooperate together and buy a significant amount of equities in order to share the return. Mutual funds are managed by professional financial market participants, so it’s vital to choose the trustworthy fund with an excellent reputation.
Real estate (Property investment)
This is quite simple yet still risky way to invest the money. You can invest your own or borrowed money to buy the property in order to rent it out. It’s important to evaluate the market, whether it’s going to go up or down in a long term. If the market will go down and real estate will drop in prices after you’ve made your investments – you will lose the money. Besides, real estate is not a highly liquid asset as you will not be able to sell it fast and get your money as soon as you need it.
This is a very risky type of investments as you are investing the money into the company which has nothing but a great idea and (hopefully) great commercial potential. In a case of success, the returns can be mind-blowing. The loss can be disastrous as well if the company go bust.
Commodities, including gold, platinum
When you are investing in precious metals you hope the price of it will go up and you will get your return. This type of investments is better to be managed by professionals, as you might need to know a lot about commodities and macroeconomics to make wise decisions.
Alternative investing means any type of investment which is out of traditional types of investments (stocks, metals, bonds, etc.) It can be bitcoins, antiquaries, and an art – anything which appeals to your investing interests.