Investing Demystified: A Beginner’s Guide to Making Money Work for You
Investing is often a word you hear a lot in financial circles, but what does it really mean? More importantly, how can you, as someone who potentially is new to the investment world understand and make money from it? In this blog piece, we will take a look into investing and unravel its mysteries.
What is Investing?
Simply put, investing is all about putting your money to work with the main aim of making more money in return. Investing can be seen as a great alternative to letting your hard-earned cash sit in a low interest savings account. Investing is different from saving in that saving typically involves putting money aside in a safe place (like a savings account) for safekeeping and earn a set amount of interest, whereas investing usually involves taking more of a risk with your money in the pursuit of higher financial returns.
You can invest your money in various assets like stocks, bonds, real estate and cryptocurrencies. The idea is that over time, your investment grows in value, earning you additional income or capital gains.
When starting out in investing it helps to understand basic concepts like risk and return, diversification, and the different types of investments available. It's important to have a clear investment goal and a basic understanding of how different assets work before getting started.
How Can I Make Money from Investing?
The Stock Market: One of the most popular ways to invest is through the stock market. When you buy shares (or stocks) of a company, you become a partial owner. If the company does well, its stock price may rise, allowing you to sell your shares for a profit. Some companies also pay dividends. Dividends are a share of the company’s profits distributed to shareholders.
Bonds and Fixed Income: Bonds are similar to loans you give to governments or companies. They promise to pay you back with interest over time. On the whole, bonds are seen as a safer investment than stocks but they do usually offer lower returns.
Real Estate: Buying property is the most traditional way to invest your money. Whether it’s a house, apartment, or commercial building real estate can be another form of investment. As your property value increases or if you rent the property out, you can generate income. For those wanting a quick return on their investment property probably isn’t the way to go but it does usually offer a lump sum when sold or a consistent return if rented out.
Mutual Funds and ETFs: Mutual funds are investment funds managed by professionals who pool (another word for combine) money from investors to buy a diversified mix of stocks or bonds. ETFs (exchange-traded funds) are similar to mutual funds in that they pool money from investors to again buy a diversified portfolio of assets. The difference is that they are traded on stock exchanges like individual stocks.
Tips for Starting Investing
Set Clear Goals: It is important to really decide on why you want to invest your money. Is the main reason for a good retirement, are you wanting to buy your own home, or are you keen on funding more education? Ultimately, your goals will influence the way you invest.
Learn The Process: It’s important to take time to learn about different investment options, risk levels, and the potential returns you could be gaining. The knowledge will be your best tool for making the best decisions for you circumstances.
Start Small and Varied: A lot of investment experts will stress how important it is not to put all your eggs in one basket. Spreading your investments across different assets in a varied markets will help reduce the risk of big losses.
Patience is Key: On the whole, investment is a long-term game. Markets regularly go up and down, but historically, they tend to grow over time. It is best to avoid making monthly changes or impulsive decisions based on short-term fluctuations.
Ask The Experts: If you’re unsure where to begin or feel overwhelmed, consulting a financial advisor could be a great first step. Their roles and career are based around helping people who are wanting to make the most of their money. An expert will help tailor an investment plan to your goals and the amount you’d like to invest.
Summary
Whilst it has so many areas and components, investing doesn’t have to be intimidating. By understanding the basics and starting with small steps whilst continuing to research and learn what works for you and what doesn’t, you can begin to grow your wealth over time. The key to investing is to remind yourself about patience. Whether you’re saving for retirement, a dream holiday, or you’re looking at securing your financial future, investing can be a powerful tool to help you achieve your goals.
Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia and New Zealand feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!