Learning to Invest

Learning to Invest

In finance, investment is the purchase of an asset or an economic resource hoping that it will generate income or can be sold in the future at a higher price. The term investment is used when referring to a long-term perspective.

Investing is the act of committing money to an endeavor, and expecting a profit. There are many ways to make an investment. This includes putting money into stocks, bonds, mutual funds and real estate. Stocks are a type of security, which signifies ownership in a corporation, and can claim parts of the corporation’s earnings. Bonds are debt investment where an investor loans money to a corporation or to the government for a certain period of time at a fixed interest rate. In order for companies and governments to finance projects and activities, they use bonds. Mutual funds are made up of a pool of funds collected from many investors that invest in similar assets, stocks and bonds.

Investing is not gambling. Gambling is were you put your money at rick by betting on an outcome that is uncertain, hoping that you will win money. True investing does not happen without you analyzing the financial value of assets. There is risk, which is when the chances of the actual return of an investment are different than expected.

Albert Einstein said that compound interest is “the greatest mathematical discovery of all time”. Compound interest is the ability of a certain asset to generate earnings, and is then reinvested to generate their own earnings. It is simply generating earnings from pervious earnings. For compounding to work, it requires the re-investment of earnings and time. The more you time you give to your investments, the more you are able to increase the potential profit of your original investment.

The one thing investors have in common is that they want to make money. However, they all come from different backgrounds and have different needs. It allows them to follow specific investing methods that will be...

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