Investment has become a buzzword in communities that want to earn and grow their passive income. It is indeed a promising landscape, but it’s not the easiest and friendliest field for beginners. It is known for its erratic behavior, for most people this is the only thing they know about investing before delving deep into it.
This article will be a guide for beginners who want to have a hand at investment.
First off, let’s lay down the fundamentals of investments.
What Is an Investment?
In the simplest sense, an investment is any property or asset that may possibly generate income in the long run. Without a doubt, the concept of investment is easy to understand. However, it is quite challenging to execute.
Investing on a particular type of property does not provide an assurance on how much the ROI will be. There’s even no assurance of a return. Despite the ambiguous nature of the task, investment still catches attention because it is indeed a cash cow when you know where to put your money in.
Despite all the challenges that precede the industry’s notion, it’s not impossible to succeed in the field if you have the right mindset and resources. An excellent course for investment is an ideal starting point for a beginner in the field. These courses often include a general overview of the field, some tips and tricks, and dos and don’ts.
What Are the Types of Investments?
The above mentioned property investment is just one of the several types of investments that you may want to dip into. Learn more about each of these types to see which one fits best to your investing behavior and preference, in general.
1. Real Estate Investment
More often than not, real estate investments often pertain to home properties. It entails the added role of being a landlord or a property owner who flips and sells the upgraded property for a higher price for maximum return.
Much like other types of investment, there’s no clear indication of how well your real estate investment will amount to. However, it does have a track record of being a sound investment because of the steady demand for it. This simply means that there is always a demand for any type of property you might want to invest in.
2. Cash Investment
Aside from real estate or property investment, the most common type of investment is, of course, cash. It’s the easiest and no-nonsense investment that anyone can get into.
The most viable method to dab into this type of investment is to store away some cash in the bank. Banks have interest rates that will add onto your stored cash. The higher the stored cash is, the higher the interest return is.
The downside to this is that most banks offer annual interest rates. This investment is not for those who live by instant gratification. Cash investments take time and a whole lot of patience from your part.
Perhaps the most volatile type of investment, investing in the stock market is one that is well-documented in popular media and hits headlines in the news. This is because of the drastic domino effect of a wrong call or a “slight” dip in the market.
Here, you invest in particular companies or industries. You can earn from their success and profit through dividends. On the flip side, you share with the losses regardless of the amount that you put in. In this type of investment, you need to look into several factors, such as the company’s historical data, current trend, and the behavior of the current market.
A critical eye is vital for investing in stocks.
Crypto Investing has been the buzz for the past few years. All the hype got people investing in different types of digital currency that have no known physical counterparts. As such, it also does not have a central regulating authority.
Here, it is a peer-to-peer scheme so you can deal with anyone from anywhere. Essentially, you buy and trade different crypto currencies which are all recorded in the block chain. It shares a similarity with stock investment as the value of these currencies also dip erratically from time to time.
However, since there is no central authority regulating this type of investment scheme, there is no firm assurance of any kind of back up when things go astray. Despite this, people are still getting into crypto investments. A CNBC sanctioned survey even claims that at least 1 in 10 people have invested or are currently involved in crypto exchange.
Tips for Beginner Investors
1. Know the Jargon
Much like any other industry, the investments scene has a lot of industry jargon where some may hold different meanings from the usual. As a beginner in the industry, learning them is one of your earliest assignments. Here’s a list of the most important things that you should first learn before dabbing into the field.
● The Stock Market and The S&P 500
These are two separate terms that usually go together.
The Stock Market is obviously the group of companies which have their stocks open for public bidding. Those who want to dabble in stock investment should know this early on.
On the other hand, the S&P 500 is a list of 500 companies that currently have the best stocks in the market. Safe to say, these companies are your safest bets when you do start investing.
● Margin of Safety
If you’re familiar with the basics of Statistics, you are more inclined to know this term ahead. The margin of safety in investing is akin to the margin of error. It is an allowable room for error in every investment you make. Much like a margin of error, there should be enough wiggle room for it to remain flexible to yield more favorable results.
● Payback Time
The definition of this jargon is quite literal. This pertains to the amount of time that you will be paid back the money that you invested.
● Return on Invested Capital (ROIC)
May also refer to as the return of investment (ROI), which is more commonly encountered daily. It means the percentage or rate of return resulting from your capital.
2. Research and Understand
Aside from learning the industry jargon, you still need to dedicate more time to learn the industry as a whole. In this industry, learning is not a one time thing. With the rapid changes that the field entails, you must be on your toes to keep up.
Research and understand new trends that will likely be most favorable to you. Don’t ignore the developments that might be detrimental to your capital and shares as well. Always be on the lookout to learn more about the growing field.
3. Be Patient
Lastly, dealing with investments is not one who likes things fast and instant. You might see instant upward motions in your investment, but is it the perfect time to withdraw your return? Or, is waiting a better decision for now? This is why research and understanding the entire scenario is also important.
Patience and knowledge should go together to succeed in this field. However, intuition is also not one to be left in the dark. Some wins come from intuition alone. So, make sure to trust your gut once in a while.
Investing is a challenge. You must always keep that in mind before you finally start your first investment. It can even be a gamble if you are pulling at random strings all the while. However, you don’t need to go in blindly. Online courses and resource materials are readily available for everyone’s disposal.
Make sure to take ample time to make each decision when you’re still starting out. It will build a strong foundation that will guide how you’ll navigate through your other investment prospects in the future. Best of luck!