Basic Investing

What is investing is a simple question. Here's a simple answer. Investing is taking money and putting it somewhere, instead of spending it. In the earlier days, investing was putting money between your mattresses. Since then, investing has become much more complicated.

There are many ways to invest. You can buy stocks and bonds, you can invest in real estate, or you can even start or purchase a business. People also invest by purchasing various collectibles that increase in value.

Do you know what the best way to accumulate wealth is? It is through hard work, saving and common sense investing. Some think this is an old-fashioned method but in reality, it's the best way for those of us who are serious about investing.

When you mention investing, the first thing people usually think about is the stock market. The stock market is a great way to invest. This includes purchasing stocks or mutual funds. Anyone can learn to be a winner with the stock market but it takes patience, time and a systematic investing plan. Sticking to proven funds over time as well as wisely managing your taxes and investment expenses are also key components of successful investing.

Investing in real estate is another great way to increase wealth. It is important though to become educated on how to manage costs and time your purchases and sales properly. Unless you know what you are doing, your risks are increased.

There are three basic types of investments:

1. Ownership Investments These are investments that represent ownership in a company, such as stocks and mutual funds.

2. Lending Investments This is where you lend your money to an organization or your local bank. This could be in the form of certificates of deposit (CD's) or bonds. With these types of investments, the money that you are lending to an organization is being invested elsewhere. People looking for "safer" investments use lending investments. As a result, they usually earn smaller returns than those with ownership investments.

3. Cash Equivalents This type of investment can easily be converted to cash such as money market mutual funds, checking and savings accounts, etc.

Four Basic Keys To Investing Are:

1. No matter how much money you earn, save something each month to invest. Do not use low income as an excuse. Don't wait for your next raise. Start now and start small if you have to. Live below your means and save.

2. To reach the top of investing performances, choose your investments with the objective of making your money grow. With CD's and savings accounts, you'll lose money due to taxes and inflation. Because of the wonder and power of compounded interest, a few extra percentage points annually will make a huge difference in your investments over time. So think long-term and think growth!

3. Try to reduce or eliminate sales commissions when investing. Let ALL your money work for you. You have access to the best investments without paying a sales commission. No one knows the future and you might as well realize now that the perfect fund manager who will tell you when to buy and sell so you can have a 40% return each year doesn't exist.

4. If the stock market drops, don't panic. Think long-term. This is a great time to buy more when stocks are "on sale". Throughout history, financial markets have always recovered. The key is waiting out the market drops.

While these are basic concepts for those interested in investing, they are a good beginning. So get started and enjoy your quest to financial freedom through the power of investing!