Investing for Beginners - This Book Includes - Stock Market Investing for Beginners & Options Trading

Investing successfully is all about working smarter as opposed to harder. Rather than working long hours and sacrificing personal happiness to sock money away in a savings account, it is about taking that money and using it to potentially build a better life in the long run through a maximization of profits earn. Investing successfully is also about setting priorities for your money and the returns it will generate. Spending is easy to do and provides instant gratification and short-term satisfaction. On the other hand, investing is all about delayed gratification and making life better in the long-term.

Okay, so why should you invest your money? If you already have that money, why risk losing it? Well, there are two things that can happen when you make an investment: You can lose your money, but you can also make more money. Of course, as an investor, your goal is to continuously make profits.

Making an investment is the way to earn financial freedom. Imagine being able to multiply your money by more than 500 times or even more than 5,000 times its value. The possibilities are endless. Of course, this will depend on where you put your money in, as well as being able to make the right investment decisions.

So, whether you just want to increase your income or if you dream as high as of attaining financial freedom, then you should definitely consider making an investment.

If you come to think about it, money moves. The value of money increases over time only if you know how to use it properly. No wonder there are many businesses around you. And, if you look closer, you will see that all these businesses are run by the same force: money. When you learn to invest effectively and successfully, you will know how you can make money to work for you instead of beating yourself for long hours just to earn a living. This time, you take control over money, just as the way it should be.

Saving versus investing: One of the most important things to understand before you begin building wealth is the difference between investing and saving money. Let’s go into what each of them is and look at the benefits and drawbacks of each. Then we will outline how to do both effectively.

Saving money is the very first thing you’ll want to focus on in your financial plan. Saving is putting money away and not touching it unless you really need to. The point is not to make a profit using your savings. Rather, it’s about ensuring that you have an emergency fund for when you need it. You want to put cash in a bank account, or under your mattress and just leave it. Almost all wealthy investors recommend holding onto a chunk of cash and keeping it in a place where no one else can find it. The logic behind this is that if the market collapses, you’ll have cash on hand to get you through. Apparently, during a big financial crisis in the recent past, some of the top investors called their wives and instructed them to take out as much money as they could from bank machines as soon as possible. The market was crashing, and they didn’t know if they would have anything in their personal accounts if they waited until the end of the day to go to the bank themselves.

It is wise for everyone to establish a nest egg or emergency fund with between three- and six-months’ worth of living expenses that they can access immediately. Investments take at least several days to liquidate, so you don’t want to have your emergency fund mixed in with your stocks, bonds, or anything else.

To find out how much you should save and have on hand, calculate all of your expenses for one month: rent, food, bills, utilities etc. Multiply that by 6 and you have your savings goal. This amount will tide you over for half a year if needed. Once again: saving is not about generating wealth or earning interest off that amount. It’s about giving yourself peace of mind and the ability to support yourself if you lose your job or something worse happens. It is only once you have this money in the bank to see you through can you start to really focus on investing successfully in the long-term.

Increased returns: One of the most important aspects of investing is what is known as compounding which is the process of generating larger returns in the long-term by reinvesting initial returns both early and often. In order for it to work out in your favor, it requires both time and initial earnings for you to reinvest. If given enough of both factors, compounding can help an initial investment grow exponentially over time. If you are lucky enough to still be 20 or more years away from retirement then compounding should be thought of as the most important investment tool in your arsenal.

For example, if you are currently 25 years old and want to save a million dollars by the time you are ready to retire at age 60, you would need to invest a little less than $900 per month, assuming you were going to maintain a steady five percent return on your investments for the next 35 years. On the other hand, if you wait to start investing until you are 35 then you will need to invest about twice as much to reach the same point. Finally, if you wait 20 years and don’t start investing until you are 45, then you would need to save four times as much to reach your goal.

Investing mindset

Were your parents always fighting about money? Did they have enough to buy anything you wanted without batting an eye or did they rob Peter to pay Paul month in and month out?

These experiences will help to form your money-mindset as you grow older and enter your own money-making lifestyle. You will find you are comfortable making a good living or insecure, or maybe you are secretive and humble. Most of your behaviors toward money as an adult as due to your exposure to and experiences with money as a child.

In any endeavor, whether you are considering a new investment or managing an existing one, you need a mindset toward that end. Look at other successful people and imitate what they do. You don’t have to get into the same business, just create the same habits in your life. You must have a mindset to make money. Starting now, you must have that goal.

Assuming you have a money-making mindset, you cannot allow that to be your focus. It needs to be foundational and the underlying basis for all that follows.

Know what type of investing suits you best: The reason that there are so many different investment strategies out there is that there is no strategy out there that is right for everyone. Each investor has different reasons for wanting to invest, different acceptable levels of risk, different metrics for success and a different desired timeframe.

In order to do so, the first thing you will need to do is consider what your goals are going to be for your broader investment strategy as a whole. For some, this will mean keeping their principal investment amount intact, while others will be more interested in taking bigger risks for the greater potential for reward. It doesn’t matter which of these styles you favor if you ever hope to invest successfully you will need to ensure you have a clear plan in place, discussed in detail in chapter 8, before you go about doing so.

When you start investing, you need to answer some questions to yourself.

• What is your goal for the profit you will learn from investing?
• What do you hope will happen to the money?
• Are you hoping to save up for your kids’ college or maybe your future retirement?
• Would you be happy closing out your account in five years with a bit of profit, or are you thinking more long term?

Based on the answers, perhaps you’ll even want to have differing investment accounts for each goal you set. Point being that before starting to invest at all, you need to know exactly what rest you’re going for and why you’re doing it. Your objectives and goals shouldn’t be entered into without thought. You must know your time horizon and risk tolerance before you start.

Familiarity with investing: Some vehicles for investing call for monitoring and complex knowledge, and others can be entered into and then relatively forgotten. The decisions you make for your personal investments need to be personally tailored for your level of comfort and your ability to put research and time into the choices you make. One easy method to go by is picking a few different low-cost index funds existing over multiple market areas, like foreign stocks, domestic stocks, and bonds.

Your risk tolerance as an investor: Risk, in investing, has many different meanings, but essentially here it means losing the money you put in. To put it another way, risk in investing means your money might decrease to zero. Every type of investing you do has some kind of risk attached to it. Stocks often go down as time goes on. For example, the S&P 500 went down almost 40 percent in the year 2008. Although this was a severe case of decline, less dramatic declines happen all the time. How much decrease can you handle as an investor?

Your time horizon as an investor: Your tolerance for risk will most likely be involved with the time period you’re hoping to have the money by, also called your time horizon. This has a lot to do with how old you are when you start investing. If you’re 25, for instance, and saving up to retire in 40 years, you don’t have to think about market fluctuations as much as someone who is in their 40s. Someone who is older will have a lower tolerance of risk because they don’t...