Investing, as we all know, is a tool used to build wealth. However, contrary to popular belief, investing is not an action that only wealthy individuals can perform. Anyone who wants and uses their mind can invest by determining an investment program suitable for their budget. Moreover, with the emergence of investment instruments that enable long-term savings by putting small amounts, “I have no money, what should I invest!” There is no room for such excuses. What do you think is the difference between investing and gambling? The answer is simple: Investing is a fruitful process in the long run, and it’s not exactly the right choice for gamblers who are trying to get rich quickly by being oriental trickery. How to Advertise on the Internet with Little Investment?
We understand that these things are not easy, so we have prepared a comprehensive article for those who do not know what investing is. In our article, we tried to cover many different topics, from the meaning of investment to making money from money, from the structure of the markets to certain strategies. We wish you all a pleasant reading.
What is Investment? How Can I Invest?
We refer to as investments, which are ventures made using money or capital on hand to generate income or profits.
Legendary businessman Warren Buffett defines investing as “spending some money now to earn more in the future”. The purpose of investing is to use your money in one or more ways to grow your wealth.
In fact, to explain the event even more briefly, we can say that “investment consists of acting smarter rather than working hard”. Most of us cling to the work we have, working day and night when necessary. The hours we spend at work are sometimes incalculable, of course, as we renounce many things in our lives, we also get our share of stress. So we’ve been working and working, then what are we going to do? Shall we put money aside and hope for miracles? Of course not. Instead of waiting idly, we will go and use the money we earn with the sweat on our brows for a brighter future! How to find a Startup Investor? Advice from the Expert
Now let’s approach the issue from another angle. Investing is also an activity that allows you to determine in which areas you will use your money and what is a priority for you. By spending your money, you can satisfy yourself in the short term. For example, you can pamper yourself by buying a new outfit, or you can enjoy a delicious and exotic dinner in the Maldives. All of these are the details that make your life beautiful, and in fact they are the actions you take to suppress your desires. Investment requires you to give up some luxuries in the short term and prioritize your future financially. Top Money Making Games
While the investor is living his life, he tries to make the best use of his money by thinking about the future, and if he acts right, he will eventually get a reward of his efforts.
Making Money From Money
“Making money out of money”, as the name suggests, is the reuse of income from any asset for investment purposes, resulting in even more profit. In order for this strategy to work properly, you should re-invest instead of spending your earnings on yourself immediately, and be patient and leave the work on time. If you apply this tactic, you can get an unexpected level of efficiency and profit from your investments. It should be noted that we recommend this method, especially for young investors. In fact, we can say that this is the best system for young people because those who invest their money at an early age by constantly investing instead of eating it can have enormous savings in the coming years. What are Natural Stones, What are the Properties of Natural Stones?
Investing in Apple stock
An investment of $10,000 made on December 31, 1980, in today’s technology giant Apple, amounted to $2,709,248 as of the end of February 2017. In other words, according to this account, a person who deposits 10,000 dollars in Apple on December 31, 1980, and does not touch his money will earn 16.75% per year.
Let’s give an important detail right away: Apple started paying dividends to its shareholders in 2012. In this case, even if the person who invested $10,000 on December 31, 1980, did not reinvest and evaluate the dividend payments Apple has given since 2012, he would still have a considerable number of 2,247,949 at the end of February 2017. So be you, try to make money from money, and don’t cut the “golden egg” unless you really need it. Now Facebook will give so much extra money for making reels
Starting ventures at a young age
While we were talking about making money from money, we talked about the importance of starting investments at a young age, now let’s underline this issue once again.
Consider a 25-year-old teenager. This young friend said, “When I turn 60, I should have at least $64,954 on the side.” sets a target. On top of that, he makes an investment plan that will earn him at least 5% per month. In such a case, this friend should invest $54 every month.
What would happen if this person started investments at the age of 35? In such a case, he would have to deposit $109 every month to reach $64,954 until the age of 60.
Let’s say you are 45 years old, you have almost no savings and you want to put $64,954 in your safe until you are 60 years old. If you start investments that earn 5% per month right now, you need to evaluate a figure of $243 per month. Do you see a big difference? If you start using your money at the age of 25, you can get the job done by putting in 4 times less money on a monthly basis than a 45-year-old! Moreover, by starting early, you can save money for your retirement days and secure your future.
Getting to Know Yourself
Let’s be honest, there is no rule that everyone will use the same investment strategy. Each person’s investment purpose, time period, and financial opportunities are significantly different from each other. Therefore, it will always be to your advantage to set your own limits and expectations well and act accordingly.
What is your purpose when investing money in any stock or real estate? For example, “Few decisions, most losses; I don’t want to take a lot of risks, it’s okay even if I don’t earn much.” are you saying? Or are you a parent with two children and you have a long-term goal of being able to easily afford your children’s university expenses?
Maybe you have dozens of financial goals in life and you are willing to make different investments for all of them? As you can see, all of this is possible. What we really want to say here is this: Be you, before you spend effort and money on anything, ask yourself “What is my purpose?” Ask the question over and over. If you answer this question honestly, you will surely find the right way for yourself.
Your risk tolerance
The word risk can mean many things, but when it comes to investment, what is meant by this word is the possibility of losing money. In other words, when we say risk, we mean that any amount we invest will lose value or even be reset.
There is a certain amount of risk involved in any investment you make. Sometimes the course of stocks resembles a ship capsized by the impact of a hurricane. For example, the Borsa Istanbul index lost 51% in 2008. Let’s just say that this is an extremely large drop and not every turbulence in turbid waters will put you in such a quagmire. However, small or moderate oscillations are also quite common in the markets.
At this point, ask yourself the following question: What is the maximum drop in my stocks can I tolerate? Your risk tolerance largely depends on your age and the time frame in which you will need the money. So someone in their 20s or 30s saving for retirement doesn’t mind the slight fluctuations that may occur in their stocks. On the other hand, a person in his 60s is more cautious when investing because he realizes that he does not have enough time to make up for a big loss. From this point of view, we can say that you should make your investments based on the time you will use the money.
Let’s give one last example to make the subject clear: Let’s say you are 32 years old and you have just had a child. Thinking of your child’s high school and university years, you already set aside some money every month and evaluate it with investments. Your child has 14 years to start high school and almost 18 years to enter college. However, you can take reasonable risks in such a situation. Well, let’s say your child has grown up and started high school. University days are slowly starting to appear on the horizon. Can you still take the same risks and be aggressive? Of course not. When you come to this period, you should downshift and try to reduce losses as much as possible by minimizing risks.
Your trading frequency
How long will you continue with the same investment, that is, hold on to the existing stocks? Investment veteran Warren Buffett, about whom we have written many articles before, says that he rarely sells his shares and is not affected much by the turbulence in the markets. This strategy, which Buffett has successfully implemented, is called the “buy and hold” tactic in market jargon.
On the other hand, there are cunning stockbrokers who are constantly buying shares and trying to sell them in a short time. If you are competent and can read the markets correctly, there is no harm in using this tactic. However, if you are a newbie investor, avoid constantly buying and selling.
Incidentally, of course, we do not say to hold the same shares for 40 years. In fact, it is useful to review your portfolio at certain time intervals and to shape your investments according to changing trends.
The comfort of knowledge
You must have extremely sophisticated knowledge and tracking skills to use some investment tools properly. However, some other tools are quite easy to use. From this point of view, we can say that when making investment decisions, you should consider your level of knowledge and the amount of time you can allocate for both research and follow-up.
If you already have a job that requires you to work from morning to night and “It is not possible for me to follow my stocks 24/7.” If you are saying that, you can consider investing in bonds, and domestic and foreign stocks that are not costly. Doesn’t that satisfy you? Then seek support from dedicated professionals and choose income sources that have high returns in the long run, such as mutual funds. With such funds, you earn slowly, but the amount you get can be really solid.
“My knowledge and experience are sufficient.” If you say so, you can turn to joint funds, individual shares, real estate, or alternative investment channels.
The Impact of Technology on the Investment World
In recent years, technology has deeply affected almost every aspect of our lives. As such, the investment also got its share from technology. In fact, thanks to technology, ordinary people can also play with money, and commissions paid to intermediaries have decreased drastically.
Buying and selling securities
Years ago, when investors wanted to evaluate their money, they could not act on their own, they had to get support from brokers. With no alternative available, commissions had to be paid to trade shares. The commissions in question were, frankly, hand-blown amounts. Moreover, the work did not end there; It was not easy to get information about the realm of the investment, since the internet and digital screens were not available like today. In fact, sometimes there was no other choice but to wait for months and look at the account statements sent to the person’s home or work address.
Today, investors can access the internet with a single click and find intermediary firms that receive the least commission, or they can trade in the securities market without being dependent on anyone. Moreover, with very small commission rates…
One of the biggest innovations we have encountered in the last 10 years is undoubtedly the Robo-advisors. Today, the world’s leading financial companies such as Betterment and Wealthfront are actively using Robo-advisors, portfolio management tools that make use of algorithms. Generally, low-cost exchange-traded funds are invested through robo-advisors. By eliminating the human factor, Robo-advisors also significantly reduce investment costs.
Robo-advisors don’t just invest in major stocks. For example, both Betterment and Wealthfront offer taxable investment accounts and recovery services for lost taxes, using Robo-advisors at this stage. In addition, Betterment even offers a Robo-advisory service that keeps in touch with financial advisors.
Types of Investments
There are many different types of investments available today. It wouldn’t be an exaggeration to say that investment trusts, exchange-traded funds, individual stocks, closed-end mutual funds, real estate, alternative investment firms, or owning a company are just a few of them. Let’s take a look at some of the most common types of investments:
By buying shares in any company, you can play a role in the success of that company. You can benefit from the increase in the value of the company’s shares and enjoy the periodic dividends to be paid to you. Shareholders also have a say over the company’s assets in the event of any liquidation.
Shareholders can vote at shareholder meetings and receive their share of periodic dividends, as we just mentioned. Preferred stockholders do not have voting rights, but have an advantage over ordinary shareholders in paying dividends. They also have a greater right to the assets of the company than regular shareholders.
Bonds are investment instruments that allow investors to lend certain amounts of money to companies in return for periodic interest payments. Many organizations, such as joint-stock companies, government agencies, and municipalities, can issue bonds.
For example, the value of a bond issued by any joint-stock company can be around $64 and earns interest every six months. Interest earned on bonds issued by companies is fully taxable. However, bonds issued by public institutions such as local governments are tax-exempt in many countries.
Bonds, like stocks, can be purchased from scratch or on the second-hand market. The value of the bond can increase or decrease according to many variables. The most important of these variables is undoubtedly the course of interest rates. Whichever direction the interest rates move, bond prices also change in the opposite direction.
A mutual fund is a joint investment vehicle managed by an investment manager. People can invest in some instruments such as stocks or bonds through such funds.
With the end of the trading day in the stock market, the value of mutual funds is determined. In addition, stock trading takes place after the markets close.
Those who benefit from mutual funds can passively follow many markets such as the stock market. There are also mutual funds that allow the investment manager to actively choose stocks or bonds. By the way, you usually have to sacrifice larger numbers to have the active type mutual funds we mentioned. The more you spend on a fund, the more your expenses are, and the less your net investment income will be in a certain period of time.
Mutual funds also make money for investors in the form of dividend payments, interest, or capital gains. Of course, these monies paid to the investor are subject to taxes that vary from country to country. Just as you sell your stocks or bonds and make a profit or loss, the same is true with mutual funds. In other words, if you make any trades at the right time, you will make a profit, and if you act hastily or misread the markets, you will lose.
Mutual funds enable low-budget investors to have different investment instruments in a very short time and add diversity to their portfolios. For example, in a mutual fund that buys shares from foreign companies, there may be more than 50 or maybe more than 100 foreign companies’ shares. Sometimes, with an investment of 2000 TL or less, you can buy all the assets in that fund over time. Long story short, mutual funds are a great form of investment that most investors, regardless of budget, can use to diversify their portfolio and increase their income in the meantime.
Exchange-traded funds (ETFs)
Exchange-traded funds, or exchange-traded funds (ETFs) in English, are similar in many ways to the mutual funds we discussed above. The main difference between them is that exchange-traded funds are evaluated during the trading day, that is, they are bought and sold throughout the day like normal stocks. Unlike standard mutual funds, which are traded at the end of the trading day, exchange-traded funds are evaluated when the markets are open.
Most exchange-traded funds are traded passively in markets such as the S&P 500, the Barclay Total Bond Index, and the Russell 2000. However, in recent years, we have witnessed the emergence of actively managed exchange-traded funds. These investment instruments, which act according to factors such as quality, low volatility, and momentum, are also called “smart beta exchange-traded funds”.
We can say that there are many more ways to make money apart from stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Let’s take a look at a few of them right now.
For example, you can make real estate investments by buying an office or a house. Thanks to real estate investment trusts, which are known as REITs in our language, investors’ money is collected in a common pool and real estate is purchased. REITs are bought and sold just like shares. Mutual funds and exchange-traded funds (ETFs) that allow investing in REITs are also available.
We can also include hedge funds and private equity funds in the category of alternative investment firms. Of course, in order to benefit from these two investment forms, you must first be an “accredited investor”, and for this, you must reach a certain net worth and income level. Money invested in hedge funds can be used in almost any field and can help you survive, so to speak, especially in turbulent markets.
Private equity funds, on the other hand, allow companies to raise capital without going public. Apart from these two, there are also private real estate funds that give shares to investors from real estate pools. Finally, most of the alternatives we have mentioned impose some restrictions on access to money. So let’s say you put $650 in an alternative fund, you run this money and after a while, you want to withdraw some of it every day. This is not allowed in most alternative investment types and you have to wait for certain time periods to withdraw your money.
If you want to take a vacation and you jumped in your car, you will be on the road. First, don’t you think about the address you’re going to, what you’re going to do there, what dishes you’re going to try? Of course, you think and act as planned as possible in order not to lose both time and money on the way. In the world of investment, it is useful to be planned in the same way. What are you aiming for? Saving money for your retirement days? Or buy yourself a nice house? Whatever your goal is, adjust your time and risk tolerance accordingly. Also, don’t hesitate to add a little variety to your portfolio; In the end, it is always useful to take precautions, as we cannot know for sure what the course of the markets will be.
We hope that this guide will bring you plenty of profit and success in your investment life. Remember, your long journey to success is just beginning! In this way, it is important to learn from every mistake, follow the agenda and be patient. Good luck to you all!