CHAPTER I: INTRODUCTION
CHAPTER I: INTRODUCTION
Most people don’t even know they are already an investor. If you have a savings account, then you can pretty much consider yourself one because you have an investment in your name.
An investment, in the most simple and basic form is this: An asset into which funds can be placed with the expectation that it will increase in value and or generate positive income. When you have more than one investment then you have created a portfolio.
The goal of investing is to gain returns that are larger than the funds you invested. For example, you invest $100 in stock X and sell stock X for $110, then you have gained a return of $10
Returns are the rewards for investing and they come in two different forms. These forms are income and increased value.
For example, money that is invested in a savings account provides income in the form of periodic interest payments. A share of common stock may also provide income (in the form of dividends). There are many investors that focus on dividend stocks because of the money they pay to you per share you own. Investors mainly buy stock because they expect its price to rise. That is, common stock offers both income and the chance of an increased value. In the instance of our example of the purchase of stock X for $100 and then selling it for $110, there was an increase in value of $10 on the share from the time you purchased it to the time you sold it. That means that when you sold it you received not only your money back but the increased value of $10.
So, what is investing?
Investing is expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture… if we go by the technical definition provided by Dictionary.com
When you decide to invest you must find an asset to put the money you worked hard for…. into, with the expectation of gaining a return. That is the whole point of investing, to get a return. The organization in which you invest in, whether it is a company or a government entity, offers you a potential future benefit in exchange for the use of your funds.
What does all that mean?
That means you are giving a business your money in exchange for equity or ownership stake in the company. You’re basically saying, “Hey, here is my money,” and they say, “Here is a share (receipt) for your investment.” Your percentage of ownership is based down to how many shares actually exist for the company, and the breakdown of ownership comes down to how many shares every shareholder owns.
These companies compete in the market for the use of your funds, similar to how retailers compete with one another for customers’ dollars by offering a wide variety of products with different features and benefits. You can invest in these retailers if you wanted to.
There are organizations attempting to raise funds from investors by offering a wide variety of investments with different attributes.
The fact is there are investments of every type are available. Some investments are virtually zero-risk such as savings accounts at banks, however, in recent years they have offered next to nothing in returns... hanging just above 0% There are banks out there trying to turn this around and offer a higher more competitive rate. Then there are shares of common stock in high-risk companies that might triple in value in a short time, but then again could not.
The investments you choose will depend on several important factors. These are your resources, your goals, and your willingness to take risk. You must have resources to fund your investing account. You must set goals and stay in tune with the market and most of all you must be able to take risk. If you can’t do any of these three things, then there really is no point in investing. This is because investing is a long-term objective, I mean you want to grow your investment account, right? Or maybe you want dividend stocks paying you monthly, quarterly or annual payouts, whatever your goal is, I’m certain it is not to lose money. Remember the last one, you have to be able to take risks. YOU CAN LOSE IT ALL.
Be smart about your investments, but also attempt to take your emotions out of investing.
The stock market goes up and down but on average grows about 7% to 8% annually, or at least it has over the last 50 years, even taking in recessions and inflation. So, sit back, relax, read this course and get started investing at your own pace.