Investments for beginners - the basics of money enrichment and modern investing

In the United States it has every other household trading account, with which he enriches his savings on the so-called financial markets. Of course, in recent years, thanks to the multitude of applications, trading has become very easy and practically out of pocket and accessible to everyone. There is no longer a need for special institutions and individuals to trade on your behalf, but anyone can direct their funds at any time to companies whose vision they believe in. At the same time, it can adapt to turbulent times and withdraw funds from the market and then reinvest them when growth occurs. This is how we can also explain the extraordinary growth of some "Blue Chip” companies such as Tesla, which is recording almost 700% growth this year.

So if you bought $10,000 worth of Tesla shares at the beginning of the year, you would have $65,000 today.

Namely, Tesla with its unique marketing in the form of personal influencer marketing executive director Elon Musk, allows for "inflating the value of the stock" and large "profits" for brave "investors". A relatively similar story is also with cryptocurrencies, where Bitcoin and its crypto community creates added value mainly at the expense of "technological" buzz and generating interest. Bitcoins in America grandmothers give for confirmation, marriage or baptism.

So when you decide to start investing as an absolute beginner, it's easy to get scared! There are too many challenges and possibilities and opportunities. But learning how to invest is far from being as difficult as it seems at first. You just need to know the right steps and basic terms. The latter can be understood by everyone, trading is an extremely natural and logical process. If there is some entrepreneur in you, you will certainly succeed. However, a great desire for knowledge and familiarity are required, which is key. Eyes open you must have especially for miscellaneous information. The latter are the main weapon of every "investor." It is always most important to build your investments around your beliefs or spheres of interest. So, if you are interested in technologies, follow them and know the innovations, you can judge the products of companies and maybe this area is the one in which you invest. On the other hand, if you have always been tempted to invest in real estate and you know this area in detail, you can create enormous added value here in the long term. So investing is not just investing in securities, but you can do it in several ways.

5+ golden rules to start investing

Investing in productive assets

Most of the time it is best to invest in productive assets, which generate money from some kind of activity that we do with them. For example, if you buy a painting, you have not acquired a productive asset. Forty years from now, you'll still only own the painting, which may or may not be worth more money. On the other hand, if you buy residential building, you won't just have a building in 40 years, you will also generate 40 years of rental income from it.

Each type of productive asset has its own advantages and disadvantages, unique quirks, tax rules and other related details. Here's an overview of the three most common productive assets you can invest in: stocks, bonds, and real estate.

Investments in shares of companies

When people talk about investing in stocks, they usually mean common stocks of publicly traded companies. But they can also buy partial ownership of a private company, which can also issue shares to its owners - just not those that trade on the stock exchange.

Investments in private companies: when you have equity in a company - an ownership stake - you are entitled to a share of the profits or losses that arise from the operations of that company. When businesses start from scratch, they can be high-risk businesses. But if you manage to financially support the right person with the right idea, you can be rewarded with a substantial return on your investment.

Investments in publicly traded companies: private companies sometimes sell part of their stake to outside investors in a process known as initial public offering or an IPO. When a company goes public and its shares are listed on the stock exchange, anyone can buy shares and become a part owner.

The types of shares you buy may vary depending on the type of person. For example, if you're someone who craves stability, you might want to invest in blue-chip stocks — technology companies that have a long record of steady earnings and dividend payouts to shareholders. These stocks may be the best example of productive assets among the stock investment categories.

If you are someone who accepts (and perhaps even enjoys) risk if it offers the possibility of greater rewards, you may gravitate towards growth stocks, which are characterized by volatile share prices with greater gains in bull (uptrend) markets and greater declines bear (falling) markets. On the other hand, if you're a savvy buyer who's always looking for bargains, you might gravitate toward value stocks and want to buy stocks of companies that are undervalued by the market.

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Investments in bonds

When you buy a bond, you're actually lending money to the bond issuer in exchange for interest income and a potential repayment of the principal—that is, the initial amount you invested. This income makes bonds productive assets.

In the world of bonds, you have several options: Treasury bonds are considered safe from credit or default risk because investors assume the federal government will honor its obligations to pay you back. You can also invest in corporate bonds, whose credit risk depends on the perceived creditworthiness of the company, which issued them. Corporate bonds that are considered to be particularly sensitive to credit or default risk are called high-yield or junk bonds.

In addition to credit or default risk for other major bonds, there is interest rate risk. Bond yield is its yield based on the interest or coupon rate it pays to holders and its price in the market. In the bond market, yield and price move in opposite directions: when yields rise, prices also fall in the bond market. And when prices and the market rise, the yield falls.

That's because when prevailing interest rates rise -- not specifically the interest rate on the particular bond you own -- newly issued bonds will typically offer a higher coupon rate to follow the general trend in interest rates. Bond, you own will be worth less in the market because there are now other bonds offering higher interest rates – and so its price will decrease as yields rise.

Investments in real estate

Most real estate investors make money by buying properties and renting them out. They can also earn by selling real estate at a profit, or for more than they spent on the purchase.

A less practical way to invest in real estate is to buy shares in companies known as real estate investment trusts or REIT. These companies own real estate of one kind or another - perhaps hotels, office buildings or even warehouses - and in exchange for favorable tax treatment, they must distribute 90% of their taxable income to shareholders in the form of dividends. We do not know or use these forms in our country and they are typical for other stock markets.

Type of ownership

Once you've decided on the asset classes you want to own, the next step is to decide how you're going to own them. For example, if you decide to invest in shares, you can own the shares outright or through combined structures. You can buy shares of individual companies or funds—mutual funds or exchange-traded funds (ETFs)—that own the shares directly.

If you buy individual stocks, perhaps through an online broker, you control where all your money goes. When you buy mutual funds, leave the investment decisions to the fund managers. And when you shop ETFs, you most often invest in all stocks of a particular index, such as Standard & Poor's 500.