Investing is easy, or at least easier than it may seem. Some are allured to it by promises of high-risk, high-reward CFD trading, but others, like all long-term investors, seek an opportunity to consistently multiply their savings over time. That’s what we’re going to do.
The truth is that behind the façade of complex terminology lies a simple concept – you save up money and invest it in staving off inflation, ultimately reaping the benefits later.
To start doing just that, all you need to do is register an account on one of the trading apps. To learn the basics of the stock market you may want to play with virtual currency before jumping into the real deal.
Stocks, Bonds, and Others
First, you need to familiarize yourself with the assets you can buy. Acquiring primarily bonds and stocks should be the main focus of good investment strategies, but there are also other assets, typically popular among traders rather than investors.
Stocks are the main source of interest income in most well-constructed portfolios, but they are widely thought of as high risk due to considerable chances of stock price falling or the company failing to pay the dividend anticipated by the stockholder. Investing in stocks is, at its core, buying some of the company’s capital, therefore becoming entitled to a proportional share of this company’s income. Stocks provide returns indefinitely, as long as the company stays in business.
A bond, on the other hand, represents a loan made by an investor to a specific company or even government. Said company or government offers to pay regular interest on the loan, as well as return the original sum lent after the bond expires. The main benefit of owning bonds in your portfolio is stability. As long as the company does not go bankrupt, you may expect to receive fixed returns on your investment.
Mutual funds and ETFs should be mentioned. They are professionally managed companies acquiring shares and bonds in many different companies on behalf of their investors. That is a great way to diversify your portfolio and lessen the risk of underperforming the market.
The main difference between them is that ETFs can be traded like a normal stock, while to invest in mutual funds, you will have to either buy in through a brokerage or by directly contacting the fund. ETFs are generally a better choice for beginners.
Why the ‘long-term’ part is so important
Your investment strategy is usually characterized as long-term if you’re aiming for making a profit in the period of anywhere from one year up to, well, until death do you and your investments part. The main plus of investing long-term is that market fluctuation becomes all but irrelevant, as if a stock price falls, it will have enough time to grow back up. Still, companies fail, that is why diversification is crucial.
So, what’s next?
Investing is not something that can be learned by reading enough information on the subject, it is a skill that can only be acquired and honed by experience. You should go out there and experience the stock market for yourself. And remember – those who get far tend to start early.
Are you planning on making a long-term investment? What do you think about CFD trading? Share your thoughts in the comment section below.