Before we start to invest, there several questions that we need to address. Let’s apply the rule of 5W1H; What, Why, When, Where, Who, How.
What is investment?
Its an endeavour that an individual takes by purchasing or spending an amount of money in the hope that the returns will be greater than the capital over a certain period of time.
Fiat money is the paper that is printed by central banks that we used to exchange for goods or services has a declining value over time. This declining value is also known as inflation. The value of fiat money is strongly dependent of the sovereign strength of the regime or the government of a certain state. The more stable the government, the more peace are the socio political order, the greater the prosperity. Without peace, there will never be prosperity. Banks are the usual avenue to store money, and in return, the banks offer an interest to the money being deposited. The value of interest is usually slightly more than the inflation rate of a particular economy. Although, some economies are so weak, banks cannot offer higher than the inflation rate.
When to invest?
As soon as a person has some savings, that’s the right time. The great investment guru, Warren Buffet started investing in his teens. Always start small. Take your time to read and learn about invetments tools and their returns. Also don’t forget the risk factors involved. Sometimes if you waited too long just to save a larger amount, the timing may not be right.
What to invest?
First and foremost, is, to invest in yourself. Get the proper education on investments, go for short courses, learn from experienced people around you. Read everything you need to know about teh potential investment that you are about to make. Never invest in something that you do not know, do not understand and do not like. You will only have yourself to blame if things did not work out.
Where to invest?
There are many financial services businesses that cater to the needs of investors. They range from the beginners, with a few hundred dollars investment kitty, to a large institutions that handle billions of dollars. Banks and insurance companies have been creative lately, they even join forces to provide savings related to investments products, or, coverage that allows the premium to be used in catered investments.
Who to invest with?
Private bankers are rare and they only work for high net worth individuals. But, there are also young guns who had just graduated with brilliant ideas. These people work in investment or brokerage companies that can provide you with great investment ideas. Do not think that inexperience is a handicap. You will never know if the twenty something guy is a Warren Buffet in the making.
How to invest?