Author: Chillmaadi Admin

If you want to build your wealth and build it quickly, there is no better way than through investing your money.  Sure, it would be even easier and faster to win the lottery, inherit a large sum of money from a distant relative, or invent the next big thing, but all of those things have a much smaller success rate.

Why should you learn how to invest instead of just paying someone else to invest your money for you?

The more money that is invested, the larger and faster it will grow.  If you are paying fees and commissions to a financial adviser, that money is not getting invested, that money is not growing, and that money is not compounding.  Depending on how much you are paying your adviser or money manager, you may be severely limiting the growth rate of your wealth.

When you learn to invest yourself, you can effectively invest on your own.  You can invest your own money while simultaneously saving bundles on commissions and fees.  On top of that, because you are in charge of your own money, you know exactly where it is.  You don’t have to worry about trusting someone else with your money.

Wouldn’t a professional do a better job to earn you more money?

The stock market is unpredictable.  That means nobody, including “investment professionals”, no one can know for sure what stocks are going to earn the most money.  No one know where the markets will go for sure.  It is likely that over time the average return will be the same or close to the average return of the markets as a whole according to stock indexes such as the Dow Jones Industrial Average (Dow) or the S&P 500.

Once you read and study as much as you can about investments, including all kinds of investments, you can do very well to earn yourself a high return.  If you aren’t that confident in yourself, even after studying, you can invest in an index mutual fund and you don’t have to worry about it as much.

Even if you never choose your own investements because you decide to hire someone else to do it for you, you should still learn how ot invest.  If you know how it works, you can better understand your money and wealth and don’t have to worry as much.  If you know nothing about investing, you could easily get taken advantage of.

You know you should invest your money, but what securities should you buy?  The investments you choose have a great effect on how much money you will earn.  Choose wisely and reap the reward.

First, let’s look at the basics.  If you are new to investing and don’t know much, there’s really no reason why you should be investing in anything other than stocks and bonds.  Real estate is another one you may know about and be interested in, be we aren’t going to talk about it here.

Should you Invest in Stocks?

Stocks are probably one of the most common investments out there, though not necessarily the most used.  Even if you know nothing about investing, you’ve probably heard of stocks.  Stock buying is ideal for those who are far from retirement and still great as you get closer to retirement.  Buying stocks is a little riskier, but if you have a long time to build wealth, you can take that risk and will earn more over time.

Should you Invest in Bonds?

Bonds are another common investment.  You might have savings bonds that you’ve received from family over the years.  Bonds are usually less risky and are better to invest in when you near retirement.  Keep an eye on the rating of the bond become low rated bonds can be just as risky or riskier than stocks.

Should you Invest in Commodities, Currency, Derivatives, etc.?

These types of investments are more for the advanced investor.  If you don’t know what they are, you shouldn’t invest in them.  Can you make more money with them than other investments?  Maybe, but maybe not.  Just like all other investments, they are a risk and you are taking a chance that you might lose money, or you might make money.  You have to take that risk.

If you are brand new to investing, while you learn, you should consider investing in mutual funds.  They are a great way to be invested in the stock market, bonds, or whatever investment you are interested in while not having to research yourself.  Later, when you are more knowledgable, you can take the new information you learn to try new things in your investing.

Financial derivatives are a bit more complicated than stocks and bonds. They are fairly new and require some concentration to understand. If you interested in investing in financial derivatives, make sure you have a good understanding of them, as you should with any investment.

A financial derivative is a contract.

When you invest money into a derivative, you aren’t buying ownership or debt, you are buying into an agreement.Derivatives aren’t stocks, but they often involve stocks.A derivative is a contract to buy or sell another security at some point in the future.

Types of Derivatives

There are several different categories and types of derivatives available. Two of the most common derivatives are futures and options, but also include forwards, SWAPS, warrants, etc.

Options

Options are most often given to employees. They are an agreement that the buyer can buy or sell a security at an agreed upon price in the future. They have the option and are not obliged to do so. It is called a ‘call’ when they have the right to buy, and a ‘put’ when they have the right to sell. These options are most often given to employees when a company first issues stock.

Futures

Futures are similar to options in that it is an agreement to buy or sell something in the future.The difference is it isn’t optional.With a future, you agree to buy or sell at a specified time in the future.

Derivatives can be just as risky as stocks, but they are also very complicated.The great investor Warren Buffett refuses to invest in derivatives because he believes he can do better with stocks and that derivatives will ultimately lose you money.

Whether or not you should invest in them depends on what kind of investing you are interested in and if you feel derivatives are a good investment. Learn more about them and find out everything you can before you throw any money into it.

What do you think of when you think of the word investing? Do you think of Wall Street and corporations? Do you picture the savings bond your grandma gave you for your eighth birthday? Maybe professional, suit-wearing business-people come to mind.

You’ve probably heard of some of the basic investments, such as stocks and bonds, but there are many more. Here are just a handful of different securities and assets you can invest your money in:

Stocks

Most people have probably heard of stocks, but in comparison, few probably own any.Stocks are a great investment for novices, experienced investors, wealthy, middle class, dirt poor, or basically anyone who is willing to invest the money.

When you own stock in a corporation, it means you own part of it.The amount of shares you own is how much you own of that company.The amount of stocks that a company has outstanding means the shares of stock issued that is still being held as investor.

To know how much of a company you own, you simply divide your shares by the shares outstanding. If you own 200 shares of 1,000,000 outstanding, you own .02% of the company. If you own 500 shares of 10,000 outstanding, you own 5% of the company. Unless you own more than 20% of a company, you won’t have a very important role or influence in the company aside from some voting rights. But technically you do own the company.

You buy shares of stock to make money. To make money with stocks, you must buy a stock at its price and later on when the price is higher, you sell it for what is called a capital gain. For example, you buy 100 Shares of stock A which is currently priced at $24. The total cost to you is $2,400. In 2 years, you sell all 100 shares at the price of $30 for a total of $3,000. Your capital gain is $600.

There are hundreds of companies you can invest in both in the U.S. and in foreign countries. Some common methods of investing in stocks include buy-and-hold, short-selling, and trading. Stocks can prove to be a very lucrative investment.  Read The Neatest Little Guide to Stock Market Investing to learn more about stocks.

Bonds

Bonds are another very common investment.When you purchase a bond, you are lending money to the bank, corporation, or government, whoever you purchase the bond from.The bond has a maturity date which is the time the entity you lent it to will pay you back.

There is also an interest rate that they will pay you annually or semiannually, that is the money you earn. You can also earn money if you buy it for less than the face value (amount printed on the bond). For example, you could buy a $1,000 bond for $950 with with a 6% interest rate with a 10 year maturity, you will be paid $60 a year for ten years, and when the bond matures you will be paid $1,000. Your gain is the $50 paid back over $950 plus $600 ($60 times 10 years), for a total of $650.

Though bonds have a maturity date, you don’t have to hold it until maturity.You can also buy and sell bonds just like stocks.

Bonds should make up more and more of your portfolio as you get older because they are less risky. As you get older, you want to take less risks to ensure that you won’t lose the money you’ll need when you’re retired because you won’t have a regular salary income.  The Bond Book: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More will help you understand bonds better.

Mutual Funds

A mutual fund is a large collection of stocks, bonds, or other securities. To invest in a mutual fund, you invest a minimum amount, usually $1,000 to $2,000. Your money is pooled together with the money of other investors. A mutual fund manager is in charge of your fund and uses the money to invest in different securities.

Mutual funds are beneficial to those who don’t have enough money yet to properly diversify their portfolio, want a professional to manage their portfolio, or want a cheaper way to invest. No-load mutual funds are very affordable because “no-load” means no fees. If you are interested in mutual funds, read Morningstar Guide to Mutual Funds: Five-Star Strategies for Success.

Derivatives

Derivatives are a little more complicated than stocks, bonds, and mutual funds. There are many different kinds of derivatives such as options, futures, SWAPS, Warrants, and others. Commodities are also a derivative. A commodity can be corn, steel, wheat, or something else of substance that people buy and sell usually through future contracts.

Because derivatives are detailed and more difficult to understand, I’m not going to go into detail here, but I encourage you to read up on them to see if they are a good investment for you. Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options is a great beginner’s guide to derivatives.

Real Estate

Real Estate investing is much different from investing in securities such as stocks, bonds, and derivatives, mostly because real estate is a tangible good and you often have to have a substantial amount of money to get started. If you own a house, you have already invested in real estate.

Some people flip houses, meaning they buy a house, fix it up, and then sell it for a profit. Others buy buildings and rent them out or buy foreclosures and sell them. If you want to get into real estate, I suggest reading up on it and choosing an option that will fit you best. A great place to start is with Real Estate Investing for Dummies.

When you think of investing, you probably think of stocks and bonds. These are both popular investment venues, but there are several others such as real estate. Real estate is land and everything attached to it. If you own a home on a quarter acre of land, you own real estate. This means you have an investment in real estate.

How do you invest in real estate?

Investing in real estate is much different and much more complicated than investing in stocks or bonds. You can’t just open up a brokerage account and purchase through them, unless you are buying some type of fund that invests in real estate.

Owning your own home should be your first investment in real estate. If you want to go further, there are many different ways, more than I can describe in one article. You could buy a home or apartment building and rent out. You could even own an office building and rent out. You could buy foreclosed homes and flip them (sell them for a higher price). You can buy a large chunk of land and sell it in broken up pieces. There are countless more ways to go about it.

Should you invest in real estate?

Real estate investing is complicated and takes a bit of a commitment. Usually, you need to have a substantial amount of money to invest, and you need to be able and willing to put in a good amount of time.

Some people make a lot of money investing in real estate. You’ve probably seen infomercials on television that go on and on about how easy it is to become a multimillionaire fast with real estate investing. Don’t let them sucker you in. It isn’t as easy as they say.

First, you need to be willing to put in the time. You need to put in the time to learn what you are doing and then to execute. If you are looking for a way to invest some extra cash easily, or are looking to start investing for retirement, real estate investing is not the way to go.

You will also need quite a bit of time and money to start out. It will be very hard to get anything substantial with a small amount of seed money. Also, you need to have the extra time. Investing in real estate will turn into a part time job. If you don’t have this kind of time, look elsewhere.

Finally, if you have the time, are willing to do your research and learn, have some money to get started, and really want to succeed in real estate investing, look into it and give it a try. It just might be what’s right for you!

What is a commodity?

A commodity is a good that is produced or sold.It is uniform between different producers.This means you can’t tell the difference from one producer to the other.Some examples are grain, corn, oil, gold, etc.

How are commodities investments?

Commodities are bought and sold similar to other investments, but they are initially acquired differently. We’ll use a corn farmer and his corn as an example.

A farmer starts to grow his corn and notices that the price of corn is fair. He wants to get a good price for his corn, so he sells it now to lock it in, even before it has finished growing. A commodity investor buys it. Then other investors can continue to buy and sell the commodity and then sell it to manufacturers and whoever needs it when it is harvested.

This goes basically the same for any type of commodity.

Should I invest in commodities?

Commodities are a fairly good investment if you are weary about getting into the stock market. It isn’t as complex and time consuming as real estate can be, but you can still make a good return with it if you buy and sell accordingly.

It is just like trading stocks and bonds but with physical products.You don’t actually buy the products and store it in your home, you have title to it.

Investing in commodities is good if you think a particular commodity will do well. For example, if you see gold start edging up in price, you can buy as much as you can and wait for the price to increase.

Commodities might not be great for your retirement portfolio, but if you give them a try, you may see some success. If you just want to own them without having to worry about them, buy into a mutual fund that is invested in commodities.

You probably have several different reasons why you want to invest your money. Overall, you want to increase the money you have as much as possible with as little risk of losing it as possible. It is what you plan to spend it on that varies. You could be investing because you have some extra cash lying around that you want to invest in, but more than likely, you are also investing for retirement.

Why invest for retirement?

Most people don’t plan on working for the rest of your life. Even if you love your job, you may be forced to stop working for health reasons, or you just grow tired of it. Either way, most people would like to retire at least some time in their sixties.

When you are retired, you stop earning money from your job, but you still need money to survive. This is why you need to stash money away. You can’t survive without money. You can’t rely on Social Security either. The people who do that now live on extremely tight budgets. You could never afford to live a comfortable retirement on Social Security, and that assumes you’ll be getting as much as they’re getting now. Who knows what will happen down the road.

Saving for retirement is not the same as investing for retirement. You can save $10 a day for 40 years and you’ll end up with $146,000. That sounds like a lot, but if you invested that same amount and earned a very modest 7% a year, you would have about $776,000 after 40 years. See the difference? You won’t have to save nearly as much if you invest it.

How does retirement investing differ from other types of investing?

Retirement investing is different from investing just “extra cash” or “to play the market” because it is being invested for the purpose of your retirement income. It is even different from investing to save for college, a house, or anything else because you have much longer time to invest, and there are investment advantages.

If you start young when you are investing for retirement, you begin by investing more aggressively. As you reach retirement, you gradually invest more conservatively. This will allow you to save and grow your investment the most while still protecting yourself until you need to retire and use this money.

There are still other advantages to saving for retirement. There are several different types of retirement accounts with tax and other advantages.If you invest in a 401K through your employer, the money you invest will not be taxed until you withdraw it.This makes it a deduction for your taxes this year.

Also, some employers will match a percentage or all of what you contribute. For example, you might be able to get a 50% match for up to a 10% contribution. This means if you make $50,000 a year and you contribute 10%, you will be contributing $5,000. Your employer will also contribute 50% of that, $2,500. You get an extra $2,500 added towards your retirement, and none of this money is taxed this year. You will pay taxes when you withdraw it after retirement.

There are also other retirement investment accounts such as an IRA or Roth IRA. An IRA is an Individual Retirement Account. It works the same as a 401K except that you can’t get an employer match, you can only contribute so much each year, and you can set it up and invest it however you want.

A Roth IRA is an IRA that you pay taxes on now. Later on, you don’t have to pay any taxes on it, even on the amount you’ve earned. That is also a great benefit if tax rates increase by the time you retire.

There are also several different types of accounts for those that are self-employed.

How should you invest for retirement?

Before you begin contributing to a retirement account, you need to set up a plan. Figure out how much money you will need for retirement. To do this, decide how much you will need to spend each year when you retire. It will be different from what you are spending now because you won’t need to spend as much, but you’ll also have to adjust for inflation of at least 3% each year.

Next, estimate how many years you will spend in retirement. This is impossible to know for sure, just overshoot a bit to ensure you’ll have enough. Multiply the number of years by the desired yearly income. This is what you’ll need. You will be keeping this money at least in bonds earning a certain percentage which should help combat inflation while you’re in retirement.

Once you know how much you’ll need, figure out how much you’ll need to save each year. Then, set up an account with your employer and start contributing.

How soon should you invest for retirement?

You can begin saving and investing for retirement whenever you want, but remember, the sooner you start, the less you’ll have to save. If you start saving at 45 years of age, you’ll only have about 20 years until 65. This gives you less time to save and less time for your money to compound and earn.

If you start saving and investing at 25 years of age, you’ll have much more time and could save much less each year. Or, you could decide to save just as much and retire early. It is up to you. You decide when you want to retire, how you want to live, and how much you want to be saving now, and you’ll probably agree that there’s no greater time than the present!

College students are notorious for being broke.  It’s not that they are too lazy to earn money with a job or that they waste all their money all the time, although for some this could be the reason.  It’s usually because of the high cost of education and the decreased amount of time to work.

Have you ever seen one of those calculators and figured out that if you invested X amount of dollars for 45 years you would have however millions of dollars?  It sounds too good to be true, but often with a reasonable rate of return, it’s very possible.  The two problems with this calculation are the assumptions that you have that much money and that you have that much time.

Start investing during your college years and you will have that much time.

If you are 20 years old and you plan on retiring at 65, you have 45 years to earn money.  Even with a small investment of $50 a month with an average rate of return of 9%, by the time you are 65 you will have over $350,000.  With an average return of 12%, that would be over $1 million.  Basically what this means is that every minute counts when it comes to investing.  Also, the earlier you start, the more risks you can take.  More risks mean the potential for more money.  You can take more risks because even if you lose money, you still have time to get it back.

But I don’t have any money?

Unfortunately, I am not going to tell you that you don’t need money to start investing.  You do, and the more the better.  What you will like to hear is that you don’t need a lot, and even college kids can get enough to get started.  If you can invest $1,000 a month, that’s incredible, but as a college student who probably don’t even make half that in a month, try shooting for $25 to $50 a month.  You would be surprised how easy it is to find this money.  Here are some quick ideas for getting your $25 minimum each month to invest.

• Save Money from your check. This can be done by foregoing your expensive latte, skipping out on the movies a couple times, or dropping any other unnecessary expense.
• Get a job. If you don’t already have one, get a job.  If you don’t need the money, than getting a job working a few hours a week will be plenty to get your $25 minimum or maybe even $50.
• Earn some cash online.  There are several ways to earn money on your own on the internet if you just want to spend a small amount of time working.  Look around and you should find something to do to make $25 a month.
• Work on campus. You can get a job on campus, but you can also do studies that give you cash as well as surveys, or go to your local plasma center and get paid for your plasma donation.
• Be creative and start your own business. Make something and sell it on eBay or sell stuff to your friends.  Use your creativity.

How often should I invest?

If you only investing $25 a month, I would suggest investing on a bimonthly basis.  If you invest every month, you will end up spending a lot on commission fees.  For example, if you invest $25 a month every month through your broker, they will take out a small part each month for commissions.  You will have spent a lot on commissions and only invested a significantly smaller amount in investments.  If you invest the same amount but only every other month, meaning you invest $50 every other month or six times a year, you will have spend less on commissions and have invested significantly more.

How do I get started?

Investing is easier than ever now that you can invest with online brokerage firms.  You can invest any amount you want, although as I mentioned, I suggest a minimum of $50 at a time.

If you aren’t experienced with stocks, don’t have time to research them, or just want the hard work done for you, go the mutual fund route.  T

All you have to do to get started is sign up, send in the appropriate copies of material for security purposes, transfer your money, and place a trade.  It’s that simple.  By the time you graduate, if you invest $25 a month and earn 10% interest a year for 4 years, you will have almost $1,500 in investments.  Increase that to $50 a month and you’ll have almost $3,000.

Start investing today to secure your financial future!

If anyone tells you that you must have $10,000 in order to start investing, and better yet that they can give you a 30% return, you need to stay as far away from them as you can.You’d actually be surprised how little you can invest.

For example, if you lend $2 to a friend and say you want it back by the end of the year with 10% interest, you’ve just invested $2.Sure, you’ve only made 20 cents, and that’s if they pay you back, but that’s just my point.You don’t need $10,000 to start investing.You don’t need close to that.

It depends on what you invest in and where you invest.

If you are going to invest in a mutual fund, usually they require at least a $1,000 minimum. The same goes for some brokerage firms and often bonds and CDs, but there are many exceptions.

If you don’t have enough money yet, just keep saving until you do.

If you want to start investing now, but you are only able to put aside $20 a month, put the money into a high interest savings account until you have more and are ready to invest. Or better yet, put aside more than $20 a month.

There is no requirement that you need to start with this certain amount, at this certain date, and at this frequency. If you have to wait a year until you have $1,000 to invest in a mutual fund, wait. If you can only invest every other month, do that. Just the fact that you are investing puts you ahead of a lot of people.

Don’t use this as an excuse to make stingy investments.

If you are able to invest $2,000 a month and still live comfortable, by all means, do it! Don’t make excuses just because they’re there. It’s all about balancing between a livable lifestyle and securing a stable future.

The problem with a lot of people, myself included, is that we decide we have to go overboard with everything we do or not do it at all.If you can’t invest $1,000 a month, do what you can.If you can invest $1,000 a month, do it!It’s that simple.

In the end, the most important thing is that you invest and save for your future. You don’t know that social security will be enough, that you’ll still have your pension, or that you won’t end up on disability for the rest of your life. Having money set aside at all time growing all by itself will do a world of good for you, so take advantage of it.

Here are the 6 steps to get you started learning how to invest money. Follow these steps to get started investing. Once you are started and get the hang of it, continue learning about investing and tweaking your portfolio. Investing is a proactive activity; you can’t just ’set it and forget it’. Keep up with it and your money will begin to grow exponentially!

Step 1: Get Money

In order to make money through investing and before you learn how to invest money, you need money to start. You can’t buy a stock or bond without money. While you’re at it, get a significant amount of money. If you invested $10, it probably will grow, but $1,000 will grow much faster.

Start budgeting your money so that you can put some aside every month for investing.You could set aside $100 or $1,000, just remember, the more you invest, the more you’ll make.

Step 2: Practice While you Wait

If you don’t have any savings to start, it will take some time to get some seed money to start your investments. Hopefully it won’t take you more than a couple of months to get enough money to get started, but in the mean time, you can still start practicing your investments.

Read everything you can about investing so that you know what you are getting into and you know what to expect. Stay up with financial news with the WSJ or other financial news sources. If you are going to invest in the stock market and you want to give it a try without the risk, sign up with an online simulator. These simulation games are  absolutely free, that you can use to invest imaginary money but use real companies to get experience investing without losing money.

Step 3: Choose your Investments

Are you going to invest in stocks, bonds, mutual funds, real estate, derivatives, or something else? Diversify your portfolio and choose investments that you feel you can manage best and will make you the most money.

Step 4: Find a Broker

In order to buy stocks, you will need a broker because you can’t go down to Wall Street and buy them yourself even if you wanted to. A brokerage firm will place the trades you tell them to and follow your orders. You used to have to call up your broker whenever you wanted to buy or sell, but now you can do it online.

If you buy and hold stocks for the long term, this is perfect.

Step 5: Set up your Investment Plan

You can invest without a plan, but you might find yourself leaving a lot of money on the table. Make up a plan. When will you invest and how often? How much will you invest? How much do you want to have in the future? Make a plan and stay on track.

Step 6: Keep Investing

A lot of people try things and give up. Investing can’t be one of them. Just because you have a bad year or even a bad decade doesn’t mean you should give up, you just need to keep at it and keep trying to improve it.  Now that you know how to invest money, you must keep on investing.

Keep saving your money and investing it and keep learning all you can about building your wealth. If you want to become rich or even just financially secure in your future, investing is key!