Investing for Beginners
Investing in Stocks
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Investing is about laying out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade.
Most of the time, this is best achieved through the acquisition of productive assets.
Productive assets explained
Investing in Stocks
Types of business equity investments
Publicly traded stocks
If you are the type of person that likes companies that are stable and gush cash flow for owners, you might be drawn to
If you prefer a more aggressive portfolio allocation methodology, you might be drawn to investing in the stock of bad companies.
Even a small increase in profitability could lead to a disproportionately large jump in the market price of the stock.
Investing in Fixed-Income Securities (Bonds)
Investing in Real Estate
Real estate investing comes down to either developing something and selling it for a profit or owning something and letting others use it in exchange for rent or lease payment.
It can allow someone without a lot of net worth to rapidly accumulate resources, controlling a far larger asset base than he or she could otherwise afford.
Real estate can also be traded like a stock. Usually, this happens through a corporation that qualifies as a real estate investment trust or REIT.
Once you've settled on the asset class you want to own, your next step is to decide how you are going to own it.
If you decide you want a stake in a publicly-traded business, do you want to own the shares outright, or through a pooled structure?
Outright vs Pooled Ownership
Outright Ownership: You will buy shares of individual companies directly. To do this right requires a certain level of knowledge.
Pooled Ownership: You mix your money with other people and buy ownership in a number of companies through a shared structure or entity. The downside is a near-total loss of control.
Decide Where You Want to Hold Those Assets
Your decision can have a major impact on how your investments are taxed.
Choices include taxable brokerage accounts, Traditional IRAs, Roth IRAs, Simple IRAs, SEP-IRA, and maybe even family limited partnerships.
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Common investment questions
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Shady investment advice
Bad investing advice can come from many quarters, such as wealth expos or financial advisors. If anyone promises you any type of return over 12%, 99% of the time, they are probably playing you.
There are great financial advisors out there, but many people who sell investment products just want your money. However, it's not that hard to invest for yourself.
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What happens to your money
Banks don’t like to give away their money. That mindset is reflected in the interest rates of checking and savings accounts of 0,5% and 0.9% avg. annual interest respectively.
When you deposit your money in the bank, the bank turns around and invests that money at 7% a year or more. After they collect their profit, they give a tiny shaving of it to you.
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