Make your money perform better: 5 basic investment concepts every investor should know!
How many times have you tried to understand finances and investments to give up mid-way (because it felt too boring and complicated) or understood things, but did not know where to and how to start? Have you too, like many others, gone through tonnes of blogs, watched a number of videos and sat in front of the TV to watch business channels for knocking some money-related sense into yourself but ended up feeling overwhelmed instead?
Let’s admit that investing can be tricky and most of us simply don’t understand it well. Which is why, in this blog, we will break down the 5 basic concepts of investments for you. Ease yourself into the world of investments so that it would become simpler for you to answer questions like ‘how and where should I be investing my money?’ all by yourself with this beginners guide to investment.
1. Time and Risk tolerance
Investments are largely determined by two factors- time and risks. To put it simply, you can choose on the time and risk factors of the investment you are making. You can decide on whether your investments will be made for a short or long term and whether it will have a higher or lower risk.
Short term investments are the ones that hold up for a period of 3 years or less and can then be converted to cash. They require more understanding of the market and involve a high risk factor.
Let’s admit that investing can be tricky and most of us simply don’t understand it well. Which is why, in this blog, we will break down the 5 basic concepts of investments for you. Ease yourself into the world of investments so that it would become simpler for you to answer questions like ‘how and where should I be investing my money?’ all by yourself with this beginners guide to investment.
1. Time and Risk tolerance
Investments are largely determined by two factors- time and risks. To put it simply, you can choose on the time and risk factors of the investment you are making. You can decide on whether your investments will be made for a short or long term and whether it will have a higher or lower risk.
Short term investments are the ones that hold up for a period of 3 years or less and can then be converted to cash. They require more understanding of the market and involve a high risk factor.
Long term investments, however, pay-off after holding them for several years. Since investing for longer periods could save your investments from being affected by the fluctuating market cycles, it is considered to be safer to investment on long-term basis.
High risk investments, as the name suggests, have a higher risk factor and can underperform leading to financial losses. Lower risk investments, on the other hand, promise some amount of returns on investments.
2. Stock Market
In simple terms, stock markets are the intermediaries between you and companies. Companies, of course, require money in order to grow. To procure it, they sell ‘shares’ or pieces of their company to people. When people like you and me buy these shares, we invest in the company they belong to and our profit or loss is determined by the performance of that company. Stock markets simply act as an intermediary to this entire process, where the companies or people interested in selling some shares list themselves with the price so that people who are willing to invest can buy the shares from there.
3. Mutual Funds
If you have understood what stock markets are, you would have realised that they come with a very high risk factor. One is always walking on a tightrope when it comes to earning profits or going through losses in the stock market and thus, it requires a certain amount of knowledge and expertise. But what if we told you that you can also invest in the stock market, leaving the headache of how and where to experts, all the while reducing the chances of going into losses? Well, this is what mutual funds are about. You give your money to a mutual funds company that invests it into the stock market with their expertise. Since these companies are largely involved in profiting through these indirect investments that we are making, their objective is to give us positive returns by doing extensive research and investing our money at the right places. Since lesser risks are involved in mutual funds, they also give lesser interests. However, they are considered safe and better for a steady growth.
4. Savings Account
A savings account is an account at the bank where you can save and withdraw money, while getting a modest amount of interest from the bank. The bank, however, places some restrictions on the number of withdrawals that can be done or the minimum amount of balance required in the account, etc. It is beneficial to save some funds in the savings account as they would help in growing your money that would be easily accessible to you in case of emergencies or when you have to make big expenditures.
5. Individual stocks
For people who are not interested or find all of this difficult, there are simpler and direct ways to invest. You might choose to invest in individual stocks like real estate, crowdfunding (raising money by investing in businesses) or gold. These forms of investments are also subject to market cycles, but are easier to monitor and operate.
All of these terms are very often used in the investment world. We hope that this read helped you understand them better and you can now decide on where you want to invest your hard-earned money for how long and with what risk. We, at Cedrus Wealth Partners, have always tried to make your journey of finances and investments better. For more such explanatory blogs, keep following us.
Cedrus Wealth Partners
High risk investments, as the name suggests, have a higher risk factor and can underperform leading to financial losses. Lower risk investments, on the other hand, promise some amount of returns on investments.
2. Stock Market
In simple terms, stock markets are the intermediaries between you and companies. Companies, of course, require money in order to grow. To procure it, they sell ‘shares’ or pieces of their company to people. When people like you and me buy these shares, we invest in the company they belong to and our profit or loss is determined by the performance of that company. Stock markets simply act as an intermediary to this entire process, where the companies or people interested in selling some shares list themselves with the price so that people who are willing to invest can buy the shares from there.
3. Mutual Funds
If you have understood what stock markets are, you would have realised that they come with a very high risk factor. One is always walking on a tightrope when it comes to earning profits or going through losses in the stock market and thus, it requires a certain amount of knowledge and expertise. But what if we told you that you can also invest in the stock market, leaving the headache of how and where to experts, all the while reducing the chances of going into losses? Well, this is what mutual funds are about. You give your money to a mutual funds company that invests it into the stock market with their expertise. Since these companies are largely involved in profiting through these indirect investments that we are making, their objective is to give us positive returns by doing extensive research and investing our money at the right places. Since lesser risks are involved in mutual funds, they also give lesser interests. However, they are considered safe and better for a steady growth.
4. Savings Account
A savings account is an account at the bank where you can save and withdraw money, while getting a modest amount of interest from the bank. The bank, however, places some restrictions on the number of withdrawals that can be done or the minimum amount of balance required in the account, etc. It is beneficial to save some funds in the savings account as they would help in growing your money that would be easily accessible to you in case of emergencies or when you have to make big expenditures.
5. Individual stocks
For people who are not interested or find all of this difficult, there are simpler and direct ways to invest. You might choose to invest in individual stocks like real estate, crowdfunding (raising money by investing in businesses) or gold. These forms of investments are also subject to market cycles, but are easier to monitor and operate.
All of these terms are very often used in the investment world. We hope that this read helped you understand them better and you can now decide on where you want to invest your hard-earned money for how long and with what risk. We, at Cedrus Wealth Partners, have always tried to make your journey of finances and investments better. For more such explanatory blogs, keep following us.
Pune, Maharashtra.
www.cedruswealth.com
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