Investing continues gaining popularity. 2020 has proved that “rainy-day fund” is must have for any financially wise person. But many people save up their money on banking accounts or keep them under the mattress. The problem is that investing is surrounded with a lot of myths. Some people believe that only millionaires invest on the stock exchange. The others think that investing takes a lot of time. And someone else is sure that it is much more profitable to buy real estate. In this article, we are going to strip away Myths about investment and look at the current stock exchange thinking outside the box.
Why should you invest?
You cannot foresee an economic situation in the country, as if you can try to make a weather forecast. But all of us have needs, and we’ll have them under any circumstances, that is why people try to reach after financial stability. Investing provides a human with the possibility not to depend financially on life circumstance, economic situation, and other people.
What else can modern people get when investing?
- Inflation Independence.
You’ll hardly like if your long-term savings go twice as low as an initial level within 10 years
Let’s imagine a simple situation. There are Alex and Kate. They got married. The spouses worked, led an active social life and wanted for nothing. Then, Kate got pregnant. Now for some time she will stay at home and look after their kid. Only Alex is supposed to keep a family now. Kate will become financially dependent on her husband. If Alex is a generous and kind man, his wife will be happy! She will easily ask for money to satisfy her needs like: visit to a cosmetician, shopping, and so on. But life is unpredictable. Family discord often happens, that is why the best solution for Kate is her own income. For instance, she can invest in the stock exchange. This activity will not take a lot of money and allow her to get a passive income regularly.
- The possibility to save up for long-term goals.
At the start it seems that it is so difficult to achieve such goals as a purchase of real estate or an expensive car, proper education for children or launching your own business. Investment builds a habit to save up a required amount all the time. Besides, a properly developed investment portfolio will allow you to get profit from a deposit. For instance, the average return of a well-thought investment portfolio is 15% per annum.
- The warm existence in old age.
Let’s imagine that you start investing in your 30, saving up 100$ per month. Your investment portfolio return is 12% per annum. By your 60 you’ll have over 300 000$ on your account. The earlier you start investing; the larger income you will get in the future.
Myths about investment
- Investing is almost like gambling
This depends on your goal. You are able to earn on the stock exchange quickly. But a high profit means a high risk. Today a deal can be profitable and double the deposit. And tomorrow a deal can decrease your deposit by several times. Such earnings are very changeable. If you want to build a constant passive income, you’d better apply a long-term strategy. Develop an investment portfolio, consisting of securities of various companies. When an investor buys stocks, he gets a share in a real business. This business can develop, become more expensive, and bring income in the form of dividends paid to the investors.
Of course, the price for securities can come down. But the stock exchange always recovers following the global economy. It is safe to invest in the stock exchange. The main thing is to know its laws and use various tools
- Only millionaires get profit
That is true that before only «Big League» was involved in investment. Times change. Now not only rich people are engaged in activity on the stock exchange. You can gain from securities with any amount of deposit. The difference is in the size of return only. Let’s say that your deposit makes 10 000$ and your portfolio consists of the same securities which your friend chooses for his portfolio with a deposit equal to 5 000$. If the return is 15% per annum, your profit will be 1 500$ per year, while your friend will get only 750$.
- This is complicated
The complicity level depends on the extent of your involvement in the process. One thing is for certain – it is impossible to make a quick dollar on the stock exchange. Firstly, you will have to spend your time on some learning or training to understand the laws of the stock exchange. Secondly, before choosing the securities, the investors make fundamental and technical analysis. Thirdly, the economic market is changing all the time and requires your close attention. Some investors learn the principle of investing by themselves, the others save their time and reach out to the special companies.
Despite the fact that investing requires special skills, you will understand the laws of the stock exchange as easily as you can learn to drive. Moreover, now the beginners have all they need for a quick and easy start:
- They can open a brokerage account online.
- There are particular companies and individuals, helping their clients to develop an investment portfolio in a proper way.
- The exchange traded funds allow the investors to invest in the largest companies of the world even with small deposits.
- Many companies and private traders provide publically available analytics.
- It is possible to use special platforms intended for automatic trading.
- l There are special services for copytrading. They allow users to invest following the strategies of successful traders. We’d highlight such services of the most popular ones: AMarkets , Forex4you and Heartbeat .
- Investing in real property is more profitable
Investment in real property is easy-to-understand and natural for people. Of course, this tool has its advantages. But it is not the best solution to increase your capital.
Pros of investing in real estate:
- It is reliable. You know, when and what amount exactly you will get.
- The price for a flat / house / premises may increase. On a long-term horizon this will help to offset the inflation.
Cons of investing in real estate:
- Average return makes about 5% per annum not including the price increase for real estate and taxes.
- Your expenses will get regained for a long time. On the average a flat will pay in about 16 years.
You can gain much more on the stock exchange market. Exchange-traded mutual fund VTBA (stocks of the USA companies) provided the return equal to 37,1% as of year-end 2020, FXCN (stocks of Chinese companies) — 48,2%. But the risks are high there: the stocks prices can fall with whiplash speed.
5. All profit is spent on broker’s commissions.
The brokers actually get interest in the form of M&A commissions. You cannot avoid this. But every broker has particular rates. Before you decide on a broker, consider all possible variants and compare their terms. Besides, you should be responsible when you are making deals. The return is not guaranteed but the commission must be paid in any case.
Thus, investing in securities is not for hot-tempered people, who live by the principle « it’s hit-or-miss!». You should invest in a responsible way. What should be done to start getting a stable passive income?
- To build your own strategy;
- To develop your investing portfolio skillfully;
- To increase your deposit regularly;
- To define a clear financial goal;
- To use advanced technologies (automatic platforms, services of copydealing);
- To spend time on training on a regular basis;
There is nothing frightful with investment. The main thing is to invest thoughtfully and in cool blood. If this article has come in useful for you, share the content with your friends in social media.