Archive for the 'investing money' Category
What lessons can be learnt from investing money in the stock market, but when it goes wrong?
It means that the investment choices made were not based on a person’s individual financial situation and goals.
Every investor and potential investor needs to take his personal situation into consideration and use that information to set financial goals for a specific time frame (meaning the time when the money invested will be needed for something else, such as retirement).
Then, pick the types of investment that will best meet these goals.
In simplified terms, this means an analysis of risk vs reward. Not having adequate diversity is very risky for almost every type of investment. Different methods of achieving diversity are available, depending on the total amount of money involved with each transaction.
Not matching the risk / reward analysis with the proper time frame is one of the biggest contributors to stock market losses. The stock market can be counted on to always go up over very long periods of time; it always has. But as the time frame is decreased, the ups and downs of the stock market increase the risks involved by a large amount. Stocks are designed to be long term investments, but some are more risky in the short term than others. This is where a person’s individual situation is very important to the choices made. For example, if the goal is to have an income in the retirement years, a person who is 25 will want to try to maximize long term gains. Since in the long run the stock market will increase, the short term ups and downs are going to be mostly irrelevant (unless you are into market timing, which inceases risk). But a person who is going to retire within a year will need a different outlook. For this person, long term growth is irrelevant, but the short term ups and downs will make a big difference in the outcome. This person will need to minimize risks and forget about maximizing returns. Safe investments will be the only logical place for this person to invest money. If investments are perfectly safe, the only losses can come from potential short term increases in inflation above the expected inflation rate.
For long term investments, the investment portfolio needs to be evaluated at many intervals, to look for mistakes. Any mistakes corrected as soon as possible will minimize any long term losses.
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I’m 18 and want to start investing my money so I have something when I finish uni. I dont have a lot (roughly £5,000), I want to invest in property but, of course this isn’t really possible with a small amount of money.
Of course I know risk = outcome
You are 18.
NOW is the time to take risk. It is NOT the time to be foolish, but it’s the time to LEARN and EARN.
With only 5000 lbs, you can’t buy all the shares of Disney you want, but you can buy a few. And buy a few McDonalds, maybe some Netflix. As little as ONE share gives you an investment in the company, and with today’s LOW LOW LOW cost on-line brokers (as little as $5US in some cases), you can pick 4 or 5 companies that you KNOW, that you LIKE and that you buy stuff from.
Imagine (as an example), that you enjoy Nike shoes.. If every time you buy them for yourself or someone buys them for you as a present, you knew that that purchase was going to impact the stock of the company you OWN a share or two of, it would make you feel doubly good.
Likewise, if you started to see the quality of McDonalds go down, and you owned a couple of shares of it, you might sell them, since your experience will likely mirror others.
When you are in your 50s, buy CDs (Certificates of Deposit). Until then, do your homework, buy what you like, and learn as you go..
It’ll make you wealthy in more than just your pocket !
GL
ed
In our second instalment we’ll cover the definition of a recession, why recessions happen, the best way to survive a recession and the difference between a recession and a depression. Download the iTunes podcast here http://tinyurl.com/b5jrht
Episode 3 coming soon.
Duration : 0:3:8