Quick definition – Investing is making your money work for you.
It doesn’t get any simpler than that, right?
Ok, so it’s not as easy as it sounds. But it can be simple.
What is Investing and How To Go About It the Right Way
Before you take any sort of action, you need to do your homework. Don’t worry, you don’t have to dedicate too much time to it.
But no matter what, you definitely don’t want to ask your Aunt Hilda what she recommends to do with your money. Then go do it without having any idea as to why it is a good idea. This will only get you into some serious trouble. And not because you took someone’s advice, which could be great. It is because you didn’t take control of your decision. You need to know what you are putting your hard earned cash into.
Think of it this way. You are told to invest in real estate. Either to buy a house to flip or to buy a rental unit. You are totally into this plan. However, you won’t just go to the bank and say here is my money, I want to buy a house. Right?
You would do your research. First you’ll find out what is the best option for you. Do you want to get a rental unit, or buy a fixer upper, or purchase a foreclosure to resell? Only you know what feels right. Next, you will decide on your budget range. And lastly, you’ll narrow your scope of where to look geographically.
The same goes for investing in the market. Just because all the ‘experts’ are saying to buy Apple or sell gold, doesn’t mean it is the right advice for you. Sure they may know something at the moment, but for long term investors you need to look at the big picture.
Before we go any further, let’s do a quick summary on what investing is all about.
Normally, when talking about investing, it usually means buying shares of either a particular company, sector or industry.
The Trader Chick’s luscious nuggets and recommendations – always start with what you love and know. If you love to shop, head over to the retail sector and see what is going on there. If you love technology, see what they are up to. Do you love green and ecological living, check that area out. DON’T ever listen to what people tell you to invest in. They don’t love what you love. They love what they love. And even though what they are investing in is looking prosperous, it won’t be any fun for you to keep track of it and learn about it. Your money can grow in every sector, so have a blast with it.
Some Boring but Totally Necessary Investing Definitions:
Stocks – When you buy into one particular company this is buying stocks or shares for that particular company only and becoming a part owner. So if you’re a Mickey fanatic or Marvel comics is your life – get yourself some Disney and become partial owner.
Funds – So you love an industry, or sector, or commodities and simply can’t commit to just one company or good. No worries, chica. That’s what funds are all about.
The Trader Chick’s little side note – I will be focusing on ETF’s (Exchange Traded Fund). I am a big hater of mutual funds because the managers of these funds earn way too much, thus taking away money from your profits. ETF’s are exactly like mutual funds with much smaller fees. Plus, you can get rid of them at any moment without any penalties, unlike mutual funds which keep you chained into them for years and have substantial penalties if you want to unload before the expiration date. Read more about ETF’s here.
Bonds – Low Risk Low Reward – bonds are usually backed by governments or corporations. Basically what you’re doing is lending your money to them for a certain period of time and at the end of that period you get it all back, plus the interest you were promised. You can either get the interest monthly, quarterly or all in one go. Since it is practically guaranteed you will get your money, the interest is really low, but a tiny bit better than the saving account.
CD’s – Certificate of Deposits – another super low risk, low reward way of investing. Here all you do is give over your money to some financial institution. They promise to give you a small interest percentage for a set period of time. This is a teeny bit better than savings, but you will be penalized if you need it sooner.
REITs – Real Estate is not at all my expertise and there are plenty of places you can check out online if you want to invest in physical properties. However, what I do know is REITs (real estate investment trusts). This way you can get in on the action of either construction companies, mortgage companies, and other real estate venture companies that deal directly with this area.
No matter what you decide to invest in, it is best to diversify. Even though you might be totally in love with Whole Foods, find other companies or sectors you love too and invest with them as well. And get some bonds in there for good measure. This way you have some sure things going on.
As cliche as it sounds – The least sexiest thing us women can do is – Put All Our Eggs in One Basket!
What is it that gets you revved up and ready to passionately dive into? Let me know in the comments.
Marina 'The Trader Chick' Villatoro