Investing 101: What You Should Know

If you're looking to invest your money, it can be difficult to know where to start. There are so many options out there! From stocks and bonds, to penny stocks and mutual funds, the world of investing is a big one. But don't worry--we've created this blog post for newbies like you!

We'll walk you through some basics: what exactly an investment is; how much risk you should take on when investing in various products; and what kind of information you should look for before making any decisions.

What is investing and why do I need to invest my money?

Investing is simply putting your money to work for you.

Investing is the act of committing to make an investment, such as buying stocks, bonds or property for the long-term. Investing ties up your money but has the potential to provide a higher return than if it was left sitting in a savings account.

You should invest because there is no better use for your hard-earned and limited income than to turn it into wealth. When you invest, you will be more likely to eventually have enough money for necessary things in life like a home, car, college tuition fees and/or retirement benefits. All these things are less achievable without investing wisely!

Investing your money means it can grow at a rate that exceeds the inflation of the world market while still being a low-risk investment. Furthermore, investing in actively managed funds increases the chances even more since fund managers must buy assets if they fall and sell them if they rise (because usually there's no way around this rule).

This is one of the reasons why over 95% of mutual fund companies don't outperform market indexes, even though investors continue to pay high fees!

How does the stock market work?

The stock market is home to 2.6 trillion dollars of outstanding value in stocks. The symbols SNAP, GOOGL, and PGE all represent different companies that have stocks available on the exchange.

Some people would say that the stock market has a higher risk than investing in bonds or savings with your bank because you are speculating instead of saving for later use; however, many see it as a good path to wealth accumulation if they can research paper prices well enough or buy at the right time when there's high demand (but low supply).

For some people who are looking for long-term investments, this might be a bad idea because their investment will take many years before they start making money from it.

Every day, millions of people buy and sell stocks. When you buy stock, you are buying part ownership in a company. You have a certain percentage of the voting power and an equal claim on all future earnings that the company makes (minus shareholder expenses), up to the amount invested in stocks. 

When someone sells their shares of stock - for example, after they retire and no longer need them - you can then purchase those shares from the market or other shareholders.

This purchase transaction will cause your combined fractional percentage vote to increase accordingly with respect to any future shareholder resolutions like electing directors or changing corporate bylaws.

Tips for investing safely online 

There are plenty of scams out there. You should always be investing consistently and following a mathematically sound strategy is the best way to go if you must invest.

• Don't be swayed by someone screaming "BUY!!!" or "SELL IMMEDIATELY!!" in your face on your laptop when you're sitting in front of it at home alone one night because it's much easier for them to take advantage of whims than those who have a plan and have bought into their strategy based on math instead of reactions.
• Don't put your money into scams or pyramids, also known as multi-level marketing schemes; unless you're really sure that that person is not a criminal. In the real world, this should be common sense but there are a lot of people out there who don't realize it's wrong to take money from others through shady means like these.
• Beware of being scammed by anyone promising unrealistic investment opportunities and big returns in little time
•  Consider investing in a diversified index fund, such as "spider" or "Vanguard S&P 500" instead of individual stocks.
• Use low-cost ETFs to accomplish the same thing, and then you can diversify among many more assets like foreign currencies and commodities such as coffee beans. Just be wary that trading commissions are often much lower with ETFs than with individual stocks. 
• Make use of identifying rogue trader red flags such as any sign of severity decline in the financial markets.
• Be careful about using any automated trading systems where you set up detailed scenarios the importance of diversifying your investments 

Common investment mistakes people make 

The most common mistakes are people simply selling too early. The stock market is notorious for the "buy low, sell high" adage all while tempting investors to look at short-term trends instead of focusing on the long-term upward trajectory and potential profit opportunities that it presents.

It's hard not to get excited about a stock that's doing well in the short term, but by ignoring consistency and rationality you can undermine your investment goals.

We have a list below of some common investment mistakes:

• Thinking that stocks always go up like the market shows on TV 
• Paying too much attention to current events and political talking points when making investment decisions 
• Not having an investment plan in place before investing in anything or with any financial advisor 
• Believing the hype surrounding investments, including "limited time offers" from hot stock picks websites and magazines that talk about "fast money" opportunities that sound too good to pass up but are actually very high-risk investments (for example, penny stocks) 
• Not bothering to lock in hefty bonuses one may earn by buying a home before mortgage rates have risen substantially more than they already have with a delayed rate of sale strategy

How do you manage everyday stresses with your investments?

Investing is about balancing risk and reward. Low risk investments must often be compensated for by low long-term returns; high risk investments would need to offer higher long-term returns in order to be worth the gamble.

Managing your investment capital under these guidelines can help reduce everyday stresses that come with investing, as you limit downside risks while still capturing strong upside potential.

For example, if you are investing a large sum of money for retirement that should last many decades—quite possibly until death—you could take some greater risks than someone who needs their investment capital at an earlier age such as 40 years old or 50 years old.

This is because the time horizon (30+ years) reduces the impact of any market volatility.

Adapt your investment strategy according to how stressful the market is. If you're feeling as if you might panic, don't invest! When the market is more stressful and the volatility level rises (as measured by indicators like VIX), consider taking some of your excess cash off of the table and lowering your allocations in stocks. 

Stressful market levels are those where investor sentiment is typically most negative as fear takes over from greed.

These are times when even experienced investors can lose their way, so know that if you find yourself getting anxious or uncharacteristically nervous during a time when nothing seems to make sense, it's ok just to back away from investing for a while and stay calm - trust me, this could be one of the best things you can do for yourself.

The basics of bonds

Bonds are issued by governments, companies, and international organizations to raise money.

Bonds are loans that an issuer (such as a business, person, or government) gives to the holder. Remuneration is given in the form of interest payments at set intervals and on final repayment of the principal amount.

The interval for these payments is often referred to as 'time to maturity' or simply 'maturity'.

Bonds are the safety net that an investor has in a company. A bond is essentially like an IOU. When you purchase a bond, you're lending money to a company — usually for 3-15 years — as part of the issuing of new shares or refinancing loans.

The price at which the bonds are sold on the secondary market is called its "yield" because it's a measure of how much your investment will earn based on prevailing market conditions.

So bonds are basically just debt instruments issued by companies that offer them as investments to investors interested in lending money to businesses who need it so they can grow and repay their debts (usually over 3-15 years).

Investing in stocks vs other types of investments

If you are a good investor, stocks might be the best type of investment for you - if not, then other types of investments might work better.

There is no one simple answer to this question because people define "investing" in very different ways and set their own goals for what they want to accomplish while holding on to an asset.

For example, if someone sets a goal of investing $100 per month in the stock market and never selling until after age 67 (35 years), then it's likely that stocks would be the ideal choice.

However, if someone defines investing as only buying low-cost index funds when markets drop (and sell high when markets rise to take advantage of losses) then an index fund might make more.

There's a real balance between quick liquidity and long-term financial stability when it comes to managing your investments - so if you're choosing between stocks vs other types of investments make sure that this balance is aligned with your goals.

There is no one-size-fits all approach to investment selection. Different assets have unique risk, return, and liquidity profiles that align with various financial goals and time horizons.

 Consider the following comparisons:

Stocks - Offer higher long-term return potential than other assets but with significant volatility and risk of short-term losses. Best suited for long-term goals 10+ years away. Provide portfolio growth.

Bonds - Typically generate steady income with lower risks than stocks. Preserve capital and offset volatility when stocks decline. Ideal for near-term financial needs within 5 years due to greater stability.

Real Estate - Can provide income from rent as well as capital appreciation over time. However, highly illiquid. Large upfront costs and hands-on management often required. Better suited for experienced investors.

Given your personal risk tolerance and investment timeline, you can allocate appropriately across assets to build a balanced portfolio aligned with your goals. Periodically rebalance holdings back to target levels as respective asset values change over time.



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