What is smart investing for beginners?
Let’s start with some fundamentals.
This post is about smart investing for beginners.
What is investing?
Investing is using money to purchase (fractional) assets in hopes of generating a profit from said assets. Investing and assets can take up a variety of modes.
Investing can include: purchasing physical real estate, brokerage accounts, REITs, purchasing art, and more!
With investing, there are two important factors to consider:
risk & liquidity
What is risk?
By definition, risk implies there is some involvement or exposure to danger. In the context of finance, risk in investing means the potential of losing money or value.
What is liquidity?
Liquidity is the ability to sell the item and turn that into cash. While some assets go up in value, is there a demand for it, and are you able to sell it for cash? It’s tempting to say the value of item x is $20, but if that value is only realized when you sell it.
Similar to stocks, if you purchase a stock of company x, it goes down in value, it doesn’t mean you lost money until you decide to sell it at that lower price.
This post is about smart investing for beginners.
FAQ:
Q: Difference between saving and investing?
A: The difference between saving and investing is mainly the level of risk. Saving involves putting cash into a separate account, typically a Savings Account, with little to no growth. However, the amount maintains its value. On the other hand, with investing, the cash you put into a brokerage account and subsequently funds you purchase, could fluctuate in value. Whether that value goes up or down is not predictable or controllable. You could invest in a fund at $10, it could go down to $9 the next day. Hence, if you sold the next day, it would be a loss of $1.
Q: How to buy index funds?
A: Check this blog post out for more info regarding how to purchase index funds!
Q: Roth IRA, 401(k), what are they, and which is better?
A: Check this blog post out for more info regarding all things retirement accounts, including the definitions and differences!
