Investment 101: Grow Your Money Wisely

There is just one purpose of investment that is to grow your money. You invest money on some assets, and after sometimes, your assets gain value and you earn profits on your investment. However, investment does not always bring you profits. Sometimes it can also make you lose your money. That is the reason why a lot of people consider investment scary. You can of course lose money but if you make thoughtful investment, you might be able to get profits. Just by simply putting your money on less risky assets, you will be able to generate returns. Imagine putting $100 in a stock market with a 10 percent average annual return. You could earn $10 from your stocks just by letting your money grow! Of course, investment carries risks, but you also need to understand it's value to build wealth over time.

Building Investment Funds

Unless you already have a lot of money for investment, you need to build funds for investment. You can build investment funds through two methods, one by getting a loan for investment, and two, by saving money. Getting a loan for investment can be risky because if you end up paying higher interest on your loan compared to the rate of return on your investment, you will be at loss. Therefore, a better strategy is to save money for investment. However, this process takes a lot of time. The investment comes with great risk, therefore, you should not invest your entire money. You will have to invest in multiple assets as well as save money in high-yield savings accounts to reduce the risk of investing. You don't need a lot of money to begin an investment, you can start small and gradually expand your portfolio. You can also start using micro-investment platforms.

Micro Investment

For a lot of people investing in the stock market is not accessible because you need to buy a minimum number of stocks and for that purpose, you might need a lot of money. Therefore, micro investment is the only option for them. Interestingly, for some people who want to invest in American companies even when they are not in the United States or are not United States citizens, micro-investment platforms are the only options. However, the most important question that needs to be answered is can you actually build a fortune with micro-investment? The definition of fortune can be different for different people, however, by fortune if you mean a lot of money, you can actually reach there if you invest regularly, for example, invest $100 every month and increase your monthly investment by 10-20 percent every year, and also reinvest whatever profit you make. In 20 years, you might be rich.

Problem with investing platforms like Robinhood and WeBull is they are not available in every location. For example, I cannot use these platforms. I hve checked a lot of micro investment platforms and none of the investment I know are available in my location. A better alternative to these micro investment platforms is crypto investment platforms like Coinbase and Binance. If you are afraid of using centralized exchanges and wallets, you can use decentralized wallets and exchanges like Uniswap, Trust Wallet or Exodous. Even though you might be able to make money from crypto market in short term, the best strategy is long term investment. Another method to control your finance is by investing in the stock market in your own country.  In my country, $50 is all you need to get started in stock market investment. You need a lot of money at once, but investing in bonds and security deposits is also a good investment strategy.

Risks in Investment

Higher risk does not necessarily mean better results. If that was the case, a lot of big businesses that started with huge funds would not collapse. If you associate risk only with the money involved, sometimes investing more results in more revenue. For example, if you have a lot of money, you can spend a lot of money to develop a lot of products, spend a lot of money on marketing, and in return generate a lot of revenue. Even though there is no guarantee that you will generate a lot of revenue, however, it is very likely that if done correctly a lot of investment will generate a lot of revenue. When a lot of money is at stake, it is of course a lot of risks. Investing $1000 is a lot risker than investing $100 because when it fails you will lose 10 times more money. Therefore, a lot of care should be taken while investing.

What is the Safest Investment?

You can invest money and create your own business. You can invest money on the stock market, crypto market, real estate market, etc. There are a lot of industries where you can invest, there are a lot of ideas that you can invest to create business. However, what is the safest investment?

The safest investment is the investment that can produce cash flow. Cash flow on your investment means you receive returns on your investment. No matter where you have invested or how you have invested (your own business or in the market), your investment should give you cash flow. If there is no cash flow, that cannot be termed as a safest investment.  The investment you make should not only grow big in terms of value, it should also produce cash. Let’s say you invested in the stocks, if you don’t earn dividend that is not a good investment, however, if you receive dividends regularly, your stocks are profitable investment.

Saving Regularly Vs Investing Regularly

If you have a regular income and belong to the middle class, you can do two things to improve your finances, one, save regularly, and two, invest regularly. Between these two, which do you think is better?

Well, the answer depends on your risk tolerance level. If you are a risk taker, you can invest regularly. Investing will yield better profits, however, your investment can also go wrong. However, if you are afraid to take risk, you can save regularly. You will also have to save in a saving account in a bank to receive interest on your saving. Even if you receiving interest on your saving, your return on saving will be comparatively lower than the return on your investment.

So, what should you do, save regularly or invest regularly?

Find a middle path, save regularly as well as invest regularly. If you were saving/investing 20 percent of your income, split into 10-10 percent in saving and investing.

What is the Best Investment

Do you know what the best investment is? In other words, what will you ever invest in?

If you are thinking about stock market, mutual funds, real estate, cryptocurrency, your own business, or any other investment areas, you are completely wrong. If you are new to the market, your first investment can just be a trial and error.

The best investment is actually an investment in yourself. Investing in yourself will pay itself over and over again.

Investment in yourself means investing to learn skills, upskill, build knowledge and expertise. Once you do that you can use your knowledge and skills to build an income, you can use your income to invest in the market, and then you can start your own business from the income you generate from the market. If you start investing without proper knowledge, you might lose your investment.

So what will you choose to invest in: on yourself, or on trial and error?

Investing in Public Company Vs Investing in Private Company

Public company means a company whose shares are available for trading through stock exchange. Investing in a public company is available for general people, anyone can buy and sell shares, whenever she or he wants. Private company means a company owned by few people and buying and selling of shares is done privately. Only the people in the close circle, possibly friends and family, can invest in private company.

The public companies have a huge paid-up capital and working capital, whereas private companies have comparatively small capital. Interestingly, when private companies want to raise funds for business development, they go public and sell their shares to the general public. A lot of big companies that you see today were initially started as a private companies, for example, Apple, Amazon, Microsoft, Facebook, Google, you name it. However, sometimes public company can also be converted to private company, Elon Musk offering to buy Twitter was one such example.

You can start investing in public company with small funds, investing in private company requires huge funds.

What to Do With Return on Investment

For a lot of people, investment is way to generate passive income, and by building passive income they believe that will have additional money to spend. When people receive return on investment such as stock dividends, they either use it to buy assets (buy properties, for example) or liabilities (a car for example). They even buy luxury with their return on investment (buy expensive items, go on a vacation, etc.). If you are financially in a better position, there is nothing wrong in spending your return on investment, you are only using your profits, your principle amount is still there.  However, if you are not in a stable financial position, it does not make sense to spend your money. You should rather compound your returns to make newer investment so that you can build your portfolio. If you cannot enjoy money when you can, what would you do with money in the old age?