Investing is a great option to increase your income and make your money work. It may seem to many that this is difficult and requires specific skills, but you just have to delve a little deeper into the topic to understand: investments are available to everyone. The article will tell you in detail how to start investing correctly. If you have no time to read, go straight to opening a brokerage account. If you still have a couple of minutes, then let’s continue.
Investment myths
In Russia, the share of the population engaged in investing is small. Only about a percent of the country’s population is present on the stock exchange, while in the United States, even housewives manage their funds. Such a little-known area looks intimidating and is overgrown with myths that do not even match reality. Here are the most common ones.
Myth one: investment is for the rich.
In reality, only a few thousand rubles are enough to enter the stock market. For example, the minimum price of mutual funds is 5-15 thousand rubles, and some brokers do not have a minimum threshold for the opportunity to start trading.
The second myth: it is impossible to earn without in-depth knowledge and skills.
Of course, you need to be guided in terms and basic principles of the economy, but a bank deposit is also an investment. Studying the available information on the web is enough for a start.
Myth three: the risks are too high, so the game is not worth the candle.
The same bank deposits are now subject to compulsory deposit insurance. The principle works perfectly here – the higher the profit, the easier it is to go bankrupt. It is better to choose investment instruments with a cool head.
Investing and investing: what is it and why?
For a better understanding, you should understand the terminology. Basic definitions that will help you understand the situation and not get confused:
investment – an investment of capital for the purpose of making a profit;
investment – the process of increasing capital and the accumulation of investment instruments that bring profit;
investment instruments – types of investments to generate income;
portfolio – all instruments in which money is invested;
diversification – the distribution of finance over several assets to reduce risks and increase profits;
broker – an intermediary in transactions between the seller and the buyer;
brokerage account – an account for buying and selling securities and other investment instruments on the stock exchange. Opens with a broker or in the brokerage division of banks.
individual investment account – an investment account that has tax benefits and some restrictions.
The success of any business largely depends on the quality of preparation and consistency in actions. Of course, financial investments are fraught with risk, but a reasonable approach and error analysis will allow us to evaluate the undoubted advantages of investing:
the opportunity to receive passive income that does not require daily routine work all day;
no income ceiling;
profit exceeding inflation;
financial literacy is increasing.
Where you can invest: tools and strategies
There are a lot of investment options. Focusing on the investment object, the following areas can be distinguished:
real estate – land, construction objects, equipment;
intellectual property – patents, research, education;
finance – securities, bank deposits, precious metals.
The minimum investment is possible only in financial instruments. Most in demand:
deposits in banks – risks and complexity are minimal, income is the same, deposits up to 1.4 million are insured;
shares – the level of risk depends on the choice of the company that issued these shares, income is possible in the form of dividend payments or from the growth in the value of shares;
bonds are a debt instrument with yields usually higher than on deposits, but slightly higher than inflation;
Mutual funds – equity participation in the formed portfolio, the profit is divided among all participants in proportion to the investments. There is an opportunity to start investing from one thousand rubles;
precious metals – it is possible to buy both physical metal and various options of exchange instruments.
When choosing an investment instrument, one should not forget about the strategy. Here it is worth relying on the investment goals, the level of knowledge and the availability of free time. There are two main strategic directions – by timing and by risk. There are three options for ROI: