You Don’t Have to Fear Ownership
Albert Einstein said, “Compound interest is the most powerful force in the universe.” Click here to see a great example of this statement. I would agree that compound interest is a very powerful force. It is truly powerful when your money makes more money and more money based on the interest rate you get. Unless interest rates skyrocket like they did in the 1980s when the interest rate on some Certificates of Deposit (CD) was 18%, historically the highest interest rates you are going to get over the long term are going to come from investing in the Stock Market. Just the thought of the Stock Market brings fear into the hearts and minds of many people. I would suggest that some of the fear is the result of the media hype around fall of the Stock Market prices. Note that there is much more emphasis placed on the Stock Market when the prices fall than when prices rise. The other reason people fear is because they do not understand the Stock Market. Although several people have and are still becoming wealthy because they invested in the Stock Market, others have not and are not taking the opportunity to invest because of fear and lack of knowledge. I must admit that the thought of investing in the Stock Market can be intimidating if you do not understand it. Let’s take a few minutes to get a better understanding of some of the basics.
What is a stock? A stock or a share of stock is simply ownership in a corporation or company. For instance, some of the places you shop for clothes and some of the clothing brands that you wear are companies that are listed on the Stock Exchange, so you can buy a share or a piece of ownership in that company. Wouldn’t it feel good to own part of the company where you shop instead of just shopping there and spending your money? While others, who own the company, make money off of you and other consumers? What is a bond? A bond is a loan to a corporation, government, government entity, or municipality. They need money, so they raise the money by offering bonds and promising to repay the investors the money they paid for the bond(s) plus a specified annual return. You can actually lend money to a corporation, and they will owe you! Some of you may be thinking that you cannot afford to buy a share of a corporation. That may be true for some corporations; however, there are ways to buy just one stock in a corporation or to buy partial shares in a corporation. Did you know you can start investing with as little as $25.00? In some cases you can start with even less! So, almost anybody can invest in the Stock Market. What about mutual funds – what is a mutual fund? A mutual fund is an investment where several people pool their money together to buy a variety of stocks and bonds. This helps them to achieve diversification so all of their “eggs are not in one basket.”
Now that you have a basic understanding of investments, you may want to know how to buy stocks, bonds, and mutual funds. In most cases bonds can be bought directly from the government or government entity. Investors can buy stocks, municipal bonds, and mutual funds online on financial websites or through licensed brokers or investment representatives (including financial advisers and financial planners). Online sites give you instructions about investing and usually charge lower fees than licensed brokers and investment representatives. However, you choose the investments yourself on an online site but licensed brokers and investment representatives can assist you in choosing investments if you choose to use their services. I encourage you to search the internet and/or read publications and other literature to find more information about investments, investing, and licensed investment representatives. You owe it to yourself to learn more. The more you know the more power you have to get wealth. After all, what you do not know can hurt you…in the long run. All the best!
Click here to get my free eBook: Money Management 101