Investing is a process that can increase capital. Many refuse this activity, citing the fact that they do not have the necessary knowledge in this area. Others point out that they do not have enough capital. In fact, these are just excuses. Now in order to start investing enough $50.
Where to start investing? How to make money work instead of yourself? These and other issues will be discussed below.
Why would you want to invest today
One day you won't want to get up at 6am for work or want to travel for a month, and your job won't let you. Or you'll get sick and won't be able to work. In order to realize your dreams, and not be a slave to the situation, it is better to start investing today.
Why is it better to start today? Foreign analysts have best answered this question:
"A person cannot work 24 hours to earn money, while money can work for him all 24 hours a day."
And without days off, lunch breaks, sick days and vacations! Money works constantly 24 hours a day 7 days a week, 365 days a year, being the most efficient workers.
Many analysts believe that Bank deposits are not investments. However, let's analyze the contributions together. Let's say you opened a Deposit of 1 000 rubles at 12% per annum for a period of 50 years, all profits (interest on the Deposit) you reinvest. What will happen in the end:
- In 3 years you will have 1 405 rubles.
- After 4 years - 1 574 rubles.
- After 10 years-3 106 rubles.
- After 20 years - 9 646 rubles.
- After 30 years - 29 960 rubles.
- After 40 years-93 051 rubles.
- After 49 years - 258 038 rubles.
- After 50 years - 289 002 rubles.
That is, in 50 years you will receive 28,300% of profits. If you, for example, decide to take a more risky path and invest money in the stock market, where the average yield is 20% per annum, then in 50 years you will get already 9 100 438 rubles. And if you invest $1,000, then in the end you will get $9100438. Impressive, isn't it? And if you report another $1,000 a month, the result is $40,000,000.
If you invest money at a higher interest rate, the result will be much higher. For example, we invest $1000 for 10 years at 50% per annum (this yield is shown, for example, PAMM accounts) with reinvestment of profits, the result will be as follows:
- After 1 year - $1,500
- After 2 years - $2 250
- After 3 years - $3,375
- After 4 years - $5,062. 5
- After 5 years - $7,593. 75
- After 6 years - $11,390.63
- After 7 years - $17,085. 94
- After 8 years - $25,628. 91
- After 9 years - $38,443. 36
- After 10 years - $57,665. 04
Of course, not everyone has the opportunity to invest $1000, but imagine if you invest a little more, and will constantly report money, the results will grow exponentially.
How to start investing from scratch
Before proceeding directly to the investment activity, you should clearly determine the investment period, the available amount, the strategy (how much money you will take, how much to reinvest), as well as the purpose (s) of investment.
Since this article is not intended for billionaires and professional investors (they already know everything), so we will proceed from a zero position (that is, investments from scratch).
We'll have to start with theory. If possible, you should study and learn from the experience of famous investors-Warren Buffett, John C. Bogle, Peter Lynch and others.
At the very beginning of the path, you should decide on the tool. The following tools can be briefly highlighted:
|Investment instrument||Minimum amount|
|bond||1 000 rub.|
|Mutual funds||1 000 rub.|
|Direct investments in companies||100 rub.|
|Realty||400 000 rub.|
|Art object||60 000 rub.|
|Banks||1 000 rub.|
|Hedge fund||$5 000|
|Venture fund||$5 000|
The chosen option should correspond to financial possibilities, expected profitability, investment terms and the chosen goals. So, real estate investments involve long-term investments and the presence of a significant initial amount, and investments in stocks will require a much smaller initial amount, but in any case, some start-up capital is needed. At the same time, one should not resort to loans or greatly worsen the standard of living.
The next point is risk diversification. Don't put "all your eggs in one basket." No matter how profitable the instrument is, do not invest all your money only in it. If you decide to invest in Bank deposits, put money in more than one account in one Bank and in one currency.
Professional approach is the distribution of funds for different assets, that is, the formation of its investment portfolio. This allows you to cover the loss of one of the assets at the expense of profits on other assets.
Minimum amount to start investing
You can start investing with 100 rubles., but the return on this amount will be minimal. Therefore, it is better to accumulate a larger amount.
According to analysts, it is best to start investing with an amount of $500. Yvette Butler, President of Capital One Investing, believes that this figure is quite reasonable:
"Everyone is able to collect such a sum - from teenagers who receive money from their parents to middle-income family people, who simply need to save 5-10 dollars a week without much harm to the standard of living of the family."
At the same time, the return on such a sum will already be tangible.
Vlad Tenev, co-founder of The robinhood micro-investment project, has a similar opinion. His advice to newcomers is simple: save $ 500 - $ 1000 and invest it in inexpensive blue-chip stocks, such as Starbucks, and wait for dividends to reinvest them further.
You can start investing with any amount, as in the stock market you can find shares of companies, the price of which is very low. But be careful, beginners are not recommended to buy shares of companies that are not included in the list of" blue chips " of the stock market.
Brokers also offer the purchase of options and CFDs, which also allow you to earn on shares. Options allow you to earn quickly, as each option has an expiration date (for example, 10 minutes). If the conditions of the transaction, you will indicate the growth of the shares, and at closing the shares do go up in price, you will get 79% of the profits.
How to start investing for a beginner: step-by-step instructions
It is important to understand that in investments it is important not only to do everything correctly, but also on time.
- Determine the purpose of the investment. Accumulation of funds for a comfortable old age or for further financing of large-scale projects require different approaches and different tools. In the first case, you can just regularly buy more "blue chips", without worrying about their low dividend yield, as in 10-20 years, the profit from them will just be at a sufficient level, while in the second case, you need to act more actively and choose more risky and profitable options.
- Asset allocation. It is important to find a balance between profitability, investment term and risk.
- To reduce the risks through diversification. In other words, " don't put eggs in one basket." By allocating money to different projects, you reduce overall losses if some of your investment decisions are not correct. Even if one or more of the assets will go to minus, the others will provide sufficient profit to reduce the losses. Of course, if the initial amount is only $1000, then you will not particularly roam, but if you want, you can find 3-4 directions for investment.
- Start with simple. Wall Street Journal financial expert Mike Piper advises newcomers looking for a way to invest a small amount of money to invest in ETF funds. This method has a low risk and simplifies the investment process as much as possible. Thus, the money will work, and the investor will have plenty of free time for personal development.
- Start with a small amount. At first, it is important to understand the market, investing every time there is an opportunity as well as a good time.
- Do not follow the advice of the media and television. "Using mass media for Analytics is the best way to ditch your investments" is the opinion of TickerChecks co – founder Laura Casey. Usually television "advisers" (with rare exceptions) are incompetent in matters of investment, and often deliberately distort information. Therefore, you do not need to listen to such advisers, you should always rely only on yourself. Even if your decision is not correct, it will allow you to "work on mistakes" for the future.
- To save, to save, to invest. Persistence and a systematic approach-that's what you need a novice investor. No matter how much you start investing, the main thing is regularity. Any money, be it 100, 200 rubles. You need to constantly increase your investment portfolio and then sooner or later it will begin to bring the desired income.
As you can see, special secrets are not disclosed here. However, there is an opinion that as such there are no secrets. Warren Buffett has repeatedly said that even the most ordinary person can make a fortune if he clearly sees the goal and patiently go to it, not neglecting the little things.
Tips for the super-rich
What principles guide the super-rich?
- Action. Bill Gates once said that most people do not achieve their financial goals not because of their physical or intellectual insolvency, but because of an irrational waste of time and energy. Doing routine work, they kill their potential, but for some reason continue to hope for luck in the form of an inheritance of some forgotten relative or winning the lottery. At the same time, if they spent less on entertainment and invested more, then in 5 – 10 years they would have the opportunity to leave the hated work and do more interesting things.
- Persistence. In investment activity you will be constantly accompanied by UPS and downs. Stories of investors who invested in stocks and lost everything in one moment are often flashed as an anti-example for novice investors. But do not be afraid to invest in investment instruments and, moreover, throw everything after the first failures. Failures bring invaluable experience, and diversification will help mitigate losses.
- Discipline. This habit should be developed as early as possible and maintained throughout life. Discipline allows you to control your expenses, and consistently go to the goal no matter what. For example, Warren Buffett, even after earning billions, continued to live in a house bought in 1958 for $31500, and the richest oilman of the 50s Harold Hunt until recently went to work in an old car and ate homemade food brought with him in a paper bag. The essence of the discipline is that anyone who wants to succeed in investing must have the willpower to maintain a standard of living that matches his income level. The loss of discipline will lead to a desire to spend money thoughtlessly, which will ultimately lead to collapse.
Even John Soros once admitted that he was on the verge of total collapse more than once and thought about giving up everything and living on the money he earned. However, there were always people who dissuaded him from this step. And, as we see, not in vain. And experienced failures have become invaluable experience that helped the financier to soar even higher.
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