Livemarkets.com
investing-day-1

Essential Trading and Investing - Why do people invest?

What is investing?

By putting your money to work for you, investing is a method to save some for the future. Investing involves purchasing a product you anticipate will appreciate in value over time.

You should keep in mind that there are no assurances. Any investment's value can and will fluctuate, so you can get back less than you put in.

Where can you place your money? The answer is very much anything, from the more traditional forms of investment, like funds, bonds, or shares, to the more unique ones, like art, comics, or cryptocurrencies.

Here, we'll concentrate on shares and funds, two of the most popular investment vehicles. 

Shares 

Shares are a small ownership position in a firm that you purchase. If the business does well, you make money. If the business performs poorly, your investment may not grow, may decrease, or in the worst event – such as the company going bankrupt – you may even lose your money.

this is not always true with shares: Bullish and bearish markets in shares can provide trading opportunities. You can also access trading shares using derivatives which involves leverage and will allow traders to potentially profit from both sides of the trade, buying or selling. However, trading with leverage, magnifies both the potential of profits as well as losses.

Other variables, such as supply and demand, interest rates set by the central bank, and the state of the overall economy, can also influence share prices.

Investment Funds 

When you purchase investment funds, you are investing in a pre-packaged portfolio of securities. An investment manager typically manages your funds on your behalf, benefiting from their experience. Since investment funds may combine a variety of asset classes   like cash, bonds, and shares, they typically offer the benefits of diversification and spreading investment risk across a wide universe of instruments

Why people invest  

Each person has unique financial objectives. Some people might invest to make extra money now; this is a common choice for people who are close to retirement. Others may be saving for a home, their children's education, their retirement, or just to have more alternatives and financial flexibility.

Many people use cash savings accounts to set money aside for the future. Currently, interest rates at banks and building societies are frequently far lower than inflation rates in several countries. This indicates that over time, the real worth of the money in your savings account is decreasing.

Shares have outperformed cash over the past 30 years. However, as the coronavirus pandemic in 2020 illustrated, unanticipated occurrences can have a substantial, immediate impact on the stock market. Stocks or shares, unlike cash in a savings account, can go down as well as up, so you might earn back less than you invested if you are positioned long. Investing with longer timeframes reduces the impact of short-term developments.

Key takeaway

You have a better chance of growing your money than in a regular savings account by investing in shares. But before you invest, it's crucial to comprehend and feel at ease with the potential risks involved.

In our next delivery tomorrow

Learn how to conquer your fear of investing