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Investing is a great way to become familiar with the financial markets. By starting up an investment account, you will begin to understand how the global markets work. The more you understand the greater the probability that you will earn money instead of losing it. Investing is not a sure bet, so if you think that it is an automatic 10% return you are a bit mistaken. There are times when markets do rise; sometimes even more than 10% a year depending on the time frame you are looking at. There are also times that markets will lose value, and in turn your investment will lose value. Most recently a market crash happened during the end of 2007 and through 2008. The market move that occurred during that time was one of the worst percentage drops ever recorded, and caused many people to lose money.
When first starting out, deposit the minimum required by your broker so that you will not be tempted to invest all your money into stocks. Starting out small and adding more money over time as you feel more comfortable is the best approach to investing. I recommend starting out by buying mutual funds that are offered by your broker. This type of investment is perfect for those who have just opened up a new account. It allows you to buy into a basket of stocks that have a professional money manager monitoring them. You will still have to do some research and learn what companies comprise the various funds available. From the research you can learn about the various market sectors and industries that make up the markets. The breakdown of what companies are in what market sectors will help you understand who the main competitors to the business are. You can then choose funds that have the companies that you believe are the best in their sector.
After you have done enough research and feel comfortable on how the markets behave, buying individual shares of stock in one or more companies is a good next step. Buying shares puts more pressure on you as an investor to pick companies that will succeed and have an appreciating stock price. Another option is to buy stocks in companies that pay a dividend so that you receive quarterly payments from the company. Dividend paying stocks are a great place to put your cash as they will give you a return on your investment, as it is being held. Hopefully when you go to sell the stock, the price has also appreciated giving you an even greater return on your investment.
If after investing in the stock market and having success, perhaps trying to invest in the currency markets is a good idea. The currency markets can make you a lot of money if you know what you are doing. The market itself is extremely large, with every major bank trading the foreign exchange market 24 hours a day 5 days a week. Even though most of the trading is done by these larger institutions, the retail investor can invest in the market. There are many forex brokers you to gain access to this market. Many if not all of these brokers will also give you free trading software that you can practice with using demo accounts. Because the forex market is a bit more volatile than the equities market it is advised that you practice with paper money before trying your luck with your hard earned dollars. Brokers will also provide online videos to help you get an understanding of how to use the various technical indicators that the majority of the forex traders use.
The sooner you teach yourself how to invest for the future the sooner you will become wealthier. Putting away money in a savings account is still a great place to start. But by investing in either the stock market or the foreign exchange market you will give yourself the opportunity to earn more. The learning process of investing is also a very rewarding experience that will empower you as a personal investor. The more time and effort you dedicate to learning the markets the faster you will have financial freedom.
This post has been written for FIRE Finance by Cesar Zambrano. He is a writer for ForexFraud (http://www.forexfraud.com/), a website devoted to educating investors in the subject of frauds and scams.
Image Source(s): iStockPhoto
Investing is a great way to become familiar with the financial markets. By starting up an investment account, you will begin to understand how the global markets work. The more you understand the greater the probability that you will earn money instead of losing it. Investing is not a sure bet, so if you think that it is an automatic 10% return you are a bit mistaken. There are times when markets do rise; sometimes even more than 10% a year depending on the time frame you are looking at. There are also times that markets will lose value, and in turn your investment will lose value. Most recently a market crash happened during the end of 2007 and through 2008. The market move that occurred during that time was one of the worst percentage drops ever recorded, and caused many people to lose money. When first starting out, deposit the minimum required by your broker so that you will not be tempted to invest all your money into stocks. Starting out small and adding more money over time as you feel more comfortable is the best approach to investing. I recommend starting out by buying mutual funds that are offered by your broker. This type of investment is perfect for those who have just opened up a new account. It allows you to buy into a basket of stocks that have a professional money manager monitoring them. You will still have to do some research and learn what companies comprise the various funds available. From the research you can learn about the various market sectors and industries that make up the markets. The breakdown of what companies are in what market sectors will help you understand who the main competitors to the business are. You can then choose funds that have the companies that you believe are the best in their sector. After you have done enough research and feel comfortable on how the markets behave, buying individual shares of stock in one or more companies is a good next step. Buying shares puts more pressure on you as an investor to pick companies that will succeed and have an appreciating stock price. Another option is to buy stocks in companies that pay a dividend so that you receive quarterly payments from the company. Dividend paying stocks are a great place to put your cash as they will give you a return on your investment, as it is being held. Hopefully when you go to sell the stock, the price has also appreciated giving you an even greater return on your investment.If after investing in the stock market and having success, perhaps trying to invest in the currency markets is a good idea. The currency markets can make you a lot of money if you know what you are doing. The market itself is extremely large, with every major bank trading the foreign exchange market 24 hours a day 5 days a week. Even though most of the trading is done by these larger institutions, the retail investor can invest in the market. There are many forex brokers you to gain access to this market. Many if not all of these brokers will also give you free trading software that you can practice with using demo accounts. Because the forex market is a bit more volatile than the equities market it is advised that you practice with paper money before trying your luck with your hard earned dollars. Brokers will also provide online videos to help you get an understanding of how to use the various technical indicators that the majority of the forex traders use. The sooner you teach yourself how to invest for the future the sooner you will become wealthier. Putting away money in a savings account is still a great place to start. But by investing in either the stock market or the foreign exchange market you will give yourself the opportunity to earn more. The learning process of investing is also a very rewarding experience that will empower you as a personal investor. The more time and effort you dedicate to learning the markets the faster you will have financial freedom.About the Author
This post has been written for FIRE Finance by Cesar Zambrano. He is a writer for ForexFraud (http://www.forexfraud.com/), a website devoted to educating investors in the subject of frauds and scams.Image Source(s): iStockPhoto
