🏦 Understanding The Basic of Investing 👨🏽🏫 PART 1
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I. What is Investing?
Investing is putting your money to work in a #stock , #bond , or other financial instruments with the potential of making a profit. It's less intimidating than you may think, and you don't need to be a #finance guru to understand and start investing. All you need is a little familiarity with some of the main concepts. Here are the basics.
🚨A few types of investments you may be familiar with:
• Stocks. These are issued by companies and are also referred to as shares. When you buy a stock, you become a partial owner of that company. Stocks offer more #growth potential than bonds, but also carry more risk. Stocks are also called #equities .
• Bonds. When you buy a bond from a government entity or company, you're #lending them money. And like any lender, you expect to be paid back in full, plus interest. Bonds generally have #less-risk than stocks, but offer lower return potential. Bonds are also called #fixed-income .
• #MutualFunds . This is a collection of stocks or bonds that's professionally managed. Mutual funds #pool-your-money with other investors to purchase securities. The price is based on the value of the securities held in the fund at the end of the trading day.
• #Exchange-Traded-Funds (ETFs). These are baskets of securities that trade like individual securities throughout the course of a trading day. The price fluctuates as ETFs are bought and sold, to reflect the changing prices of the underlying holdings.
How do you make money through investing?
Your investments can make money in 1 of 2 ways. The first is through #payments — such as #interest or #dividends . The second is through investment appreciation, aka, #capitalgains . When your investment appreciates, it increases in value.
🤓Give me a simple example🤓
• Let's say you purchased a single share of a company for $10 and the share price increased by 10% over the course of a year. If you sold that share at $11, you'd make $1 in profit, minus any trading costs or taxes. Any increased value of your #holdings is "realized" when you sell your holdings. Until then, any #appreciation is considered "unrealized" gains. If the stock also paid a $1 dividend, your total return would be $2 or 20%.
#learingtheropes #possibilities #invest-i-gate #longterm #buildandgrow #wealth2022 #whynot #everylittlebitcounts
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