how do you invest? what exactly is investing? why do people invest? is it risky? does it need bitcoins or crypto? (lol i also have no idea on what is crypto or bitcoins i’m just trying to guess lol)
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All investment is risky. You mitigate the risk by diversifying what you invest in. For example generally speaking, when stock prices are high, bond prices are low and vice/versa. So if you diversify your investments, you’ll be making money SOMEWHERE most of the time.
“Investing” is when you buy “shares” of a company/industry/market that you believe holds value with the intention of being rewarded by that company in dividends or higher stock prices down the road that you MIGHT sell if the price is right. You could be wrong, you could be right.
There are 3 things to know about investing.
1. Spend as little as possible to invest. Think of this as if you went to the ATM to get cash to buy apples. If the ATM fees are high, you’re paying just to pay for apples. If apples are on sale for $2 off, but you spent $3 in ATM fees just to pay for the apples, you’ve already overpaid. Companies like Vanguard allow you to buy your apples at cost with no fees.
2. Many people are trying to “beat the market”. The very best/brightest/luckiest people who do this for a living, who went to school to learn to “beat the market” still fail to do this regularly. You can BE the market they’re trying to beat if you invest in Index Funds, which are bundles are various stocks. You can buy the entire stock market in a bundle pack with specific Index Funds. Think of it like playing a number on the roulette wheel vs owning the casino. You might hit big with specific stocks, but the house always wins in the long run. Be the house.
3. Making money takes TIME and PATIENCE. It’s a steady stream of a lifetime of investing, making money off of those investments, then investing more. Google “Compound Interest Calculator” and punch in some numbers. The more time you have to invest, the better off you’ll be over time. It’s better to invest a little over a longer period of time, like when you’re 20 years old, than to dump a bunch of money in when you’re 50. Time=money. The more time you have, the more money you can earn. (Or recover if you lose)
You should read two books to have a very clear understanding of investing. Read them in order.
1. The Intelligent Investor -By Benjamin Graham.
2. The Boglehead’s Guide to Investing -By Taylor Larimore
Those two books, read in that order, will give you a great foundation on how to Invest, what the difference between investing and speculating is, and how to maximize your profits while minimizing your risk. The TLDR of those books is that the greatest minds in the world can’t reliably tell what the market will do in an individual business sense, but they understand that “over a long enough period of time, the market tends to go up”. The Einstein of the investing world recommended Index Funds for people who want an overall lifetime of good earnings, nothing crazy risky over the course of your entire life, but not bad either.
As to the “why” of investing. Your money makes you money. If you’ve investing in things that earn a “dividend” then you can turn around and put that money back into buying more of the thing that makes you money. If you buy a box that costs you $2 to buy, and it pays you $1 each year, in a few years the money the box pays you gives you enough that you could buy another box with, which also pays you. This snowballs over enough time.
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