Investing is when you put money into something in order to get money back. This means that you spend money to make money and reach your financial goals.
When you’re giving your money to a company, government, or other entity in the hope that they will give you more money in the future. There are a lot of reasons why people invest money, but the most common is to save for retirement, buy a house for their kids, or send their kids to college.
When you invest, you don’t save money or trade. Investing is more risky than saving money. Savings can sometimes be safe, but investments are not. If you kept your money under the mattress and didn’t invest, you’d never have more money than you’ve saved yourself.
So, many people choose to put their money in the stock market. It is possible to spend money on a lot of things. Just a few of them:
People invest in different types of investments.
- Stocks
- Bonds
- ETFs
- Mutual funds
- Cash equivalents
- Real Estate
- REITs
- Commodities
Things to think about before investing
Ahead of anything else: Before you start investing in anything, you should think about a few important things. In order to start investing right away, we need to know a few things about your finances.
Do you have a lot of debt on your credit cards?
Because if you say yes, that means you’re not ready to invest yet. To start, do everything you can to get rid of that debt, because no investment will consistently outperform the 14% or so APR that you’re likely paying to a credit card company to pay off your debt, so do that first. Getting rid of your debt starts here.
Do you have an emergency fund?
It’s polite to say that people poop. When you get laid off or get sick, your life can be turned upside down. Let’s look at the ways your life can be turned upside down. Almost any financial expert will tell you that in order to avoid total ruin, you should have between six months and a year’s worth of living expenses in cash or in a savings account, just in case. Start saving money now, and come back to this article when you’ve got your emergency fund in order. If not: Save up, then come back to this article when you’ve got your money in order.
Also read
How to Invest Money Wisely