[Investment] - Learn the basic of financial investing
[Investment] - Learn the basic of financial investing
Written by madnilk
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Today I'm going to summarize on learning the basic of making an investment which relates with our finance status and profile. Investment is something crucial intact with finance management toward gaining our financial freedom or even making slightly more convenient money or income.
Before we go deep about financial investment, its better to know some of basic thing about it:
1. Risky investment (if it work) usually paid handsomely than the safe one.
2. Over long term, stock have historically outperformed all other investment, while hazardous if term with short time.
3. Focus on earning determiner when talking about investment.
4. Inflation may be the biggest threat to your long-term investment.
5. A diversified portfolio is less risky rather than one that concentrated on single or few investment
Such thing as the good, bad and ugly do exist when we talk about financial investment. People are being delusive by other (especially their agent) when it comes to what the reality of being involve directly toward finance investment perspectives.
Everything are sure extreme fact that need us to make further precocious act before making any decisions by jump into fund without getting sufficient info. Which state as below.
"The 1990s enjoyed the biggest bull market in U.S. history. During the decade the Dow more than quadrupled.
While stocks, as represented by the S&P 500, have not always performed so extraordinarily - compounding at a dazzling 15.3 percent annual rate for that time period - they have usually been the best performing asset class over time.
Since 1926, stocks have returned an annual average of 9.6 percent through 2008 -- and that included the most recent horrendous bear market. Over the same period, government bonds returned 5.9 percent, and "cash," the term used to describe Treasury bills and other short-term investments, has returned just 3.7 percent. (This according to the folks at Ibbotson Associates in Chicago.) In other words, if you're investing for the long-term, stocks are the place to be.
But if you're looking to invest money you may need in a year or two, the stock market can be downright dangerous. Look no further than the Dow's 554-point drop - a 7.2 percent loss - on Oct. 27, 1997, and the 508-point drop on Oct. 19, 1987 - a harrowing 22.6 percent loss - to see what a difference a day can make.
Then there are those bloody bear markets, like 1973-74, when the Dow fell 45 percent. In 2008, the total stock market lost 37 percent.
To cite a severe example, if you had bought the stocks in the Dow Jones industrial average at their peak in early 1966, you wouldn't have made any significant profit until mid-1983 - more than 17 years later. Even that was better than if you'd bought in the pre-crash peak of 1929. After that, it took until 1954 for the market to regain all it lost in the Depression. As for the market woes of the early 2000s, it would take more than five years using an historical average rate of return, for the Dow to return to its glory-day levels from its October 2002 low.
Bonds, of course, are another story. While they won't give your portfolio the kind of kick that stocks will, nor are they likely to give it the same kind of thrashing. In 1994, the worst single year for bonds in recent history, intermediate-term government bonds (that is, Treasury securities with maturities of 7 to 10 years) fell just 1.8 percent. In the good year that immediately followed, they bounced back an impressive 14.4 percent. From 2000 through 2002, bonds outperformed stocks every year - a historic "three-peat" that hadn't been seen in the modern investment era that began in 1929.
The 1990s enjoyed the biggest bull market in U.S. history. During the decade the Dow more than quadrupled.
While stocks, as represented by the S&P 500, have not always performed so extraordinarily - compounding at a dazzling 15.3 percent annual rate for that time period - they have usually been the best performing asset class over time.
Since 1926, stocks have returned an annual average of 9.6 percent through 2008 -- and that included the most recent horrendous bear market. Over the same period, government bonds returned 5.9 percent, and "cash," the term used to describe Treasury bills and other short-term investments, has returned just 3.7 percent. (This according to the folks at Ibbotson Associates in Chicago.) In other words, if you're investing for the long-term, stocks are the place to be.
But if you're looking to invest money you may need in a year or two, the stock market can be downright dangerous. Look no further than the Dow's 554-point drop - a 7.2 percent loss - on Oct. 27, 1997, and the 508-point drop on Oct. 19, 1987 - a harrowing 22.6 percent loss - to see what a difference a day can make.
Then there are those bloody bear markets, like 1973-74, when the Dow fell 45 percent. In 2008, the total stock market lost 37 percent.
To cite a severe example, if you had bought the stocks in the Dow Jones industrial average at their peak in early 1966, you wouldn't have made any significant profit until mid-1983 - more than 17 years later. Even that was better than if you'd bought in the pre-crash peak of 1929. After that, it took until 1954 for the market to regain all it lost in the Depression. As for the market woes of the early 2000s, it would take more than five years using an historical average rate of return, for the Dow to return to its glory-day levels from its October 2002 low.
Bonds, of course, are another story. While they won't give your portfolio the kind of kick that stocks will, nor are they likely to give it the same kind of thrashing. In 1994, the worst single year for bonds in recent history, intermediate-term government bonds (that is, Treasury securities with maturities of 7 to 10 years) fell just 1.8 percent. In the good year that immediately followed, they bounced back an impressive 14.4 percent. From 2000 through 2002, bonds outperformed stocks every year - a historic "three-peat" that hadn't been seen in the modern investment era that began in 1929." - Online source.
Next, is to know what kind of investment platform are much more suitable with or margin and capital strength. Either to choose stock market, bonds, Mutual funds (which consists more than one fund serve by the mutual company) and currencies trading (Forex) which will be discuss as sole topic later on in the future.
Finally, the menace within financial investment which hidden behind the peril of evil aspects. Lot of peoples do assume that market crash is the treat to investor, but the truth always tell that from among worse enemy is none other than inflation itself.
Let's say the market takes a 30 percent dive over the next year. Every time you check your stocks or stock mutual funds, you're going to feel the pain. Likewise, if interest rates rise, your bonds won't let you forget it.
Nowhere on your bank or brokerage statement, however, are you likely to get a report on what inflation is doing to the real value of your holdings. If your money is stowed in a "safe" investment, like a low-yielding savings or money market account, you'll never see how inflation is gobbling up virtually all of your return.
Here are some points to bear in mind:
- At an average annual growth rate of 9.6 percent a year, stocks will double your money about in a little more than seven years. Factor in inflation, which has historically run at about 3.1 percent annually, and it will take more than 10 years to double your actual buying power.
- Likewise, bonds, which have historically grown at roughly 5.9 percent annually, will double your money every 12 years. After inflation, however, it will take 26 years.
- If your money is in cash, you'll have to wait 23 years for the nominal value of your account to double, assuming the cash earns the historical 3.1 percent annual return. But even your grandchildren won't see the real value of your money double.
That's why, whenever you add up your gains or losses for a given period of time, you have to add in the effects of inflation to understand how much further ahead or behind you really are.
p/s: financial investment are well said and done when you have a great agent and decent provider company which sometimes cause extra money, but hey - Why bother the extra ad up if we can make money or adding up income handsomely. That all from me for now, Daaaa 
