Understanding The Basics of Investing

Many of us have heard of people investing money into the world and then using that as a way to get rich. Some of us have probably even considered trying to make money that way ourselves.

Despite the risks, there are several compelling reasons to make investing a part of your overall financial plan. Through investing you can preserve your wealth by overcoming the effects of inflation, help save for long-term goals, and gain an additional source of income. These benefits are even more rewarding if you start at a young age. The stock market, however, is well known for having its set of myths that typically prevent people from making investments. Myths are typically created by individuals who never learned everything there is to know about the stock market and how to make the best investments. Let’s explore some of these.

Myth: By taking a chance on a risky investment and some stroke of luck, you can wake up the next day as a millionaire. You have to risk everything in order to get a worthwhile reward.

Reality: Serious investing requires a lot of time. There is an entire education behind active trading. To invest without any prior research would be similar to taking your chances in the lottery. Becoming educated on the stock market in combination with staying up to date on world factors that affect economy can make investing less about taking a gamble and more about making calculated decisions.

Myth: For every investing success story, there’s an accompanying horror story. Investing is so scary and so unpredictable that it’s simply not worth the risk.

Reality: Risk and losses are both very real outcomes of investing. HOWEVER, after making smart, thoroughly researched investment choices, your next best protection against risk and volatility is the amount of time you have for your investment to mature. The narrower your investment time frame, the more vulnerable you are to sudden and often unpredictable changes in the market. A long term investment has lower risk because there will be time for the stock to recover from market declines.

Myth: Playing it safe means measly returns.

Reality: Time is compound interest’s best friend. Together, they can really put your money to work. Even products with a relatively low expected yield can accumulate a lot of wealth over long periods of time. This is why even playing it safe can still be worth it in the long run.

So are you ready to begin your own success story as an investor? In this month’s “It’s a Money Thing” video, learn the basics of investing by following Jen on another adventure as she seeks advice from a world famous rich guy!

^Alec