After many decades of working hard and saving a little each month, you may notice something interesting about your finances. The money you earn is quickly dissipated because your rate of pay appears to be in close competition with the cost of living. And if you did heroically manage to save some money, it’s barely earning much interest.
If you quit trading your time for money and put your money to work for you, using your money to make money, it will not only be easier on your muscles and nerves, but the notes and coins in your keep begin to pile up and multiply. You may have heard about this type of sorcery by another name–investing.
Here is a quick look at how to invest by buying stocks, mutual funds, and foreign exchange.
Investing in the Stock Market
Don’t be confused if you hear the stock market described as the share market or the equity market. These are all different ways of describing the same thing—a market where an aggregation of people buy and sell shares that may be either publicly listed or privately traded. This financial market is open most of the year, except for Stock Market holidays. If you’re in the US, then NASDAQ and NYSE Holidays fall on Martin Luther King Jr. Day, Good Friday, Memorial Day, Labor Day, Thanksgiving Day, Independence Day, Christmas Day, Washington’s Birthday, and New Year’s Day.
You can access this market by either choosing a face-to-face broker or an online brokerage. After researching stocks that look promising, decide what price you’d like to buy them at, decide how many you want, and decide whether you would prefer a market order or a limited order. Incidentally, if you want to save on brokerage fees, you can acquire stock directly from the company you like.
Investing in Mutual Funds
A mutual fund is not as complicated as it sounds. It’s simply professionally managed investment funds holding multiple securities. Essentially, you will be pooling your money with other investors to buy assets like equity securities (stocks), debt securities (bonds), and other securities. Pooling securities in this way provides three big advantages: lower fees, professional management, and diversified investments.
Investing in Forex
“Forex” is an abbreviation often used for the foreign exchange market. This is a huge worldwide market where the daily volume of trades averages about $5 trillion. This market is open every day of the week around the world, starting at the end of Sunday in Sydney and closing at the end of Friday in New York based on GMT time. It’s an over-the-counter market where a variety of traders—central banks, commercial banks, corporations, brokers, and individuals—trade currencies.
You can access this market with your computer through a Forex broker. Once you have your account setup, decide what currency pair you want to trade; decide how you want to trade, i.e., with City Index Spread Betting or with CFD or with Forex Trading; and decide whether you would rather buy or sell. From that point on, add orders, monitor market movements, and close your trade.
Reasons for Investing
There are many reasons why working people don’t invest even if they have some extra money. They may, for instance, think they need a lot to start investing or they may think it requires considerable study and practice to learn how to trade in any financial market. Most of these reasons are not factually accurate.
The reason why people do invest is a little more complex. Many reach a point in life where they notice that all their hard work isn’t paying off. They see themselves in the same place they were years ago (or even worse off than before) because of the rising cost of living. This can be discouraging, especially if they went back to school to learn to earn better-paying skills and worked long, hard in their new career. At this point, they may have questioned if there was an easier way to earn money other than trading away the precious hours of your life away for it? The answer, of course, was investing.
In closing, think of investing as sacrificing present comforts for future rewards. Warren Buffett, the famous investor, has described investing as putting some money down now to receive more of it later on. So, think of investing in shares, mutual funds, and foreign currencies as a way of preparing to receive additional income in the future.