Why you must learn how to invest your money.
Most of the question you hear from beginners is, “how do I invest my money?” Some people will put it in a different way by saying, “what investment is right for me?” Well, these questions are the same. While there is nothing bad in seeking for advice on how to invest your money, this type of questions tells me more about the individuals concerned. It reveals the level of investment literacy of such person. A wise person once said, “if you don’t know where you are going, all roads will look like the right way”. At times, he will say it in another form by saying, “if you don’t know where you are going, other people will show you the way to go”. The Great Book has its own contribution in this saying. It says, “some people want to get to the city but they don’t know the way to it. All of these sayings are trying to point out the frustration that comes with ignorance. We all know that ignorance is a disease. You are victim of what you don’t know.
So, let’s come back to the subject at hand which is “how to invest for beginners”. I know that some people will expect me to talk on how to invest in stocks, how to invest in gold or how to invest in real estate. I am going to address this topic in a different way. I like to say that the first thing you need to do is not to rush into investment of any kind so that you don’t get your fingers burnt. The best way to start investing is to invest in education.
Education has proved to be the best investment that will always yield the best returns. So, the question you may like to ask is, what type of education? When I talk about investing in education, I am not talking about the traditional education which is all about going to school and get a high grade. Of course, there is nothing bad in this but you will agree with me that there are many graduates with high grade who are roaming about streets jobless and broke. Before you go into investing, you need to first invest in educating yourself about investment at large. You should acknowledge that there are several investment vehicles. For instance, you may be interested in investing in mutual funds, stocks, bonds, gold, real estate or business. All these investments have their peculiarity. So, if you what to invest in stocks, it makes sense to understand the basics of investing in shares at least. You will like to educate yourself about some vital terms such as share price, dividend yield, price yield, earning per share (EPS), Price Earnings Ratio (P/E), Price to Book Value, Bullish and Bearish markets etc. Of course, there is nothing bad in asking for professional advice or paying an expert to make an investment decision for you. However, you should understand that the fact that someone is an expert does not mean that he will always make the decision that best suits your interest. So, the salient question is not what to invest in, it is having the right education that will help you make the right investment decision that will not only secure your capital but will also enhance your returns.
Why you should learn how to invest?
Investment in education yields the best returns: The returns on your investment may not be as quantifiable the same way you can measure your returns on investment in stocks. But the truth is that, whatever level of returns you enjoy in any investment is a direct consequence or result of the level of the knowledge you have about the investment. The unfortunate thing is that, most of the investment beginners usually jump this process. They rush into investment simply because someone told them that the investment is good. Before you know it, they lose their hard earned money. This situation is even worse when one can easily use his credit card to make stock purchase online.
If you have the right knowledge about an investment, you become more confident with your investing decision. I remember the first time I bought stocks. The truth is that I bought the stocks just because I wanted to make money without knowing how stock market operates. Shortly immediately I bought the stocks, its price started going down. I became very nervous. The next thing I did was to sell off the stocks at loss. By the time I sold off the stocks, the price jumped again. It continued gaining points every day in a ten day roll. Thinking that the trend will continue that way, I bought into the same stocks again. As if the market was waiting for me to buy the stock, thereafter, the price continued to nose dive again. To cut the story short, I lost more than twenty five per cent of my capital within twenty days. I then remembered a saying that; “if education is too expensive, then try ignorance”. Ignorance costs! So, if you are not willing to learn how to invest, I will say that investing is not a good option for you.