How To Invest Money?
Everyone has heard the statement “Money makes money”. What they have not heard is how difficult it is or how quickly you can lose it. In this article we will cover some basics about how to invest money. These basics hold good for most of the investment areas. We will also provide some resources for Forex Trading.
The value of money
Money has value. How do we judge it? Simple ways of judging this are:
Money has value. How do we judge it? Simple ways of judging this are:
- Look at the national inflation index and know how much value you have lost. Stable currencies tend to lose less than 4% every year. Risky currencies can lose an upward of 11% per annum.
- Look at your ability to buy gold. Gold is considered a good reserve. A lot of currencies are backed up by gold deposits. This then is a good indicator of your money’s value.
There are other ways and more complicated indexes that can be referred to. For simple understanding it is enough to follow inflation rates of your currency.
Safety of Money
If you carry a million dollars in a bag with open zipper in a subway, chances are that you will be robbed. It is easy to see the safety of physical money. In the investment world, such safety becomes blurred and is best a measure.
If you carry a million dollars in a bag with open zipper in a subway, chances are that you will be robbed. It is easy to see the safety of physical money. In the investment world, such safety becomes blurred and is best a measure.
Banks are considered safe. We have seen banks go bust but they still remain among the safest institutions. You can invest in schemes floated by the banks. Read the fine print, if it warns you that it is risky, it probably is.
There are bonds and other similar instruments that are brought in the markets by governments. They are considered as safe as the government’s reputation.
Other investments are considered riskier than banks. A lot of factors play a role in assessing the safety of an investment:
- Who is guaranteeing it?
- What are the likely changes?
- What kind of crashes can we expect?
- How likely are we to loose money?
Answering the above questions will give you an idea of how risky the investment is.
Measuring returns on investment
If you are going to invest, by definition it is for making profits. There is a range of investments that one can make:
If you are going to invest, by definition it is for making profits. There is a range of investments that one can make:
- Bank Fixed Deposits – These are considered safe
- Bonds by governments – these are relatively safe as well
- Property investments – these are considered relatively safe if you have the patience to sit out the turbulences
- Trading in equity markets – these investments can be very beneficial but are considered highly risky
- Forex Trading – this is considered risky, with a promise of high returns
You may see the trend here. The riskier the investment, the higher the returns is.
Summary of how to invest
Fresh investors should understand that the rewards are proportional to the risk. The higher the risk, the higher the reward is. In any case, you would invest your money so that it would at least cover the inflation rate, remain secure and give some rewards.
Fresh investors should understand that the rewards are proportional to the risk. The higher the risk, the higher the reward is. In any case, you would invest your money so that it would at least cover the inflation rate, remain secure and give some rewards.
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