Many people talk of themselves as being investors. When I hear someone mentioning that he or she is “investing” some money I always ask them: “Are you investing or trading?” I usually get people confused with this little question. The fact is: Most people don’t know what investing is and they cannot tell the difference between investing and saving on one hand and trading and gambling on the other hand. So let’s look at the four most common types of what you can do with your money if you don’t spend it:
Saving
Saving is about preserving what you have – without the intention of gaining anything. Saving money means you put money away in a safe place, so you can use it later to either invest it, spend it or do whatever you like with it. It does not mean exposing your assets to any type of risk at all. Saving could be in the form of a savings account, cash, gold or whatever does not put your money at risk. An investment fund or a 401K is NOT saving money. Investment funds – like the name suggests is investing.
Investing
Investing has the idea of long term natural growth associated with it. Investing money means giving your money away with a certain amount of risk and the chance for a certain profit. Often the exact amount of the profit is not known in advance. So is the risk that you might lose your money or a part of it. In general an investment is a commitment to convert liquid assets into more illiquid types of assets for a minimum of 2 years or more. Yes, investing is a long-term commitment and something that has made many people unspeakably rich. Investing is not for nervous or paranoid people. It is for the smart and bold. If you are paranoid, you should be saving instead of investing. If you are looking to make quick cash you should be trading.
Trading
Trading is more similar to dealing in any particular goods. There game is buying low and selling high – whether you are dealing in textiles, watches or stocks. The time horizon for a trader is short term. A trade can be from a few minutes to a few months. It doesn’t really matter what the time frame is. What matters is your intention and mind set. If you strive to buy low and sell high, you are a trader – not an investor.
Don’t get excited over your trades. If you a seeking pleasure and you find that trading is actually fun and giving you a certain kick, then you are not trading – you are gambling
There are different intentions associated with different types of actions. They could be described as below:
Mindset: Preserving
Action: Saving
Predictability: High
Risk: Low
Potential Reward: Safety
Mindset: Growing
Action: Investing
Predictability: moderate
Risk: moderate
Potential Reward: long-term appreciation
Mindset: Making money
Action: trading
Predictability: low
Risk: high
Potential Reward: high return
Mindset: Excitement
Action: gambling
Predictability: very low
Risk: very high
Potential Reward: loss
When you go from Saving down to gambling with each step predictability is decreasing and risk is increasing.
So when you think about investing your money, think of your goal first – then decide what your strategy should be.
Steve Brzinski writes for several magazines and e-zines. Visit his stock market investment site at http://www.stockmarket-investor.com/.
Article Source: ezinearticles.comMultiply Your Money – Invest with Care
The investment in stock multiplies quickly. The certificates of deposits may give you interest rates ranging from 4 to 5% depending on the deposit period. Out of the interest that you receive, you have to pay income tax as if it is applicable to you.
The invisible deduction on the interest comes from inflation. The inflation rate of about 3% in USA makes a hole in your pocket without your knowing it. When you consider income tax and inflation together, you may be actually loosing money rather than making money on your certificate of deposit.
Excess Money – Your Saving
The money you every month or year earn is not all spent in the same year. Clever and careful persons always control the expenditure so that they always have an excess of money over the expenditure. This is the rate that drives the future progress of a country
The personal saving rate in USA has been lower at 8% compared to other countries where the rates of 15 to 30% have been the norm over last few years. This excess money is the saving you can invest. Since the savings available in USA is only 8%, the case for investing wisely becomes stronger.
What is the best avenue?
If you can take some calculated risks, the stock markets become the focal point of investing. The increase in the wealth can be phenomenal. An investment of $10,000 made in Microsoft shares in 1986, was worth $3.5 million in 2004. There is no way in which the certificate of deposits can match this kind of increase in personal wealth. But remember not every company has the growth rate of Microsoft.
The General Impression
The general impression about the stock market continues to be bad and the cases of persons going down in stock market become the talk of social circle. No one talks of Warren Buffets of stock markets until they have reached the level of legends. Such legends may be few in number, but there are many Warren Buffets in waiting in wings about which one knows or cares to talk about.
So What Do I Do?
The key is to start investing wisely and go up as you progress. If you follow the tips given below the chances are you might make money sooner than you think.
A warning is due here. Although the tips can be given, there is no guarantee that you will make as you might desire and the rate of your growth cannot be certain. It all depends on how you go about it. None is going to walk you through the phase of investing with a guaranteed return on your investment.
Smart Investing Tips
• Have a plan ready and consult your broker when you make that plan operative.
• Study the market changes and do not be in a hurry to make an investment before you have studied the market movements.
• Although “buy low and sell high” is the stock market mantra, remember that it is not possible to do it always. Whenever you get profit, do not forget to bring it home and re-invest.
• When in doubt, wait and wait. Do move for kill if you find an opportunity. Be ready to take risks if necessary, but the risks should be calculated ones and not reckless.
• Ask when you are not sure. Deal only with the established brokers and develop good relation with the broker. It might pay you in just one deal with that broker.
• Never invest on hot tips, rumors, or inside information. Do not give in to pressure tactics.
• Be on lookout for smart investing opportunity. Once you get it do not let it go.
For more information on shares and investing in stock market, please visit http://stockmarketpages.info
Article Source: ezinearticles.com|
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