‘Investment’ is not just a word but a key factor that impacts our future plans. Money is the first thing that comes to mind when we think of investment. But, there is another term, ‘human capital investment,’ which implies knowledge, health, and skills that people invest in and accumulate throughout their lives. That’s why people highly invest in their education as well. When people start earning money, after certain years or so, they start planning for the future by saving some of their income. Saving doesn’t multiply your money. But imagine if your money could multiply. That too, without taking much of your time!
Surprising, Isn’t it? Well, that’s what the best way to invest money can do for you, and here’s a guide for it.
What is Active And Passive Investment
Many humans have a natural tendency to show off. However, most billionaires, such as Bill Gates, Mark Zuckerberg, etc., don’t believe the same. Suppose you buy a Mercedes, and someone else who earns just as much as you, buys a Creta. In the beginning, it may feel like a status symbol for you. But in time you’ll realize that the function of mobility is being served by both of them, even though you spent lakhs more than the other person.
Similarly, there are usually two major camps when it comes to investing money –
1. Active Investment
As the term ‘Active’ suggests, this investment runs actively. It is an ongoing buying and selling activity done by the investor. It can have certain benefits where investors can use active investing to take advantage of short-term trading opportunities. Active investing can help money managers meet their client’s specific needs, such as retirement income, providing diversification, and even retirement income.
2. Passive Investment
Unlike Active investment, this involves a long-term strategy for building wealth by buying securities that mirror stock market indexes and holding them for the long term. It can have certain benefits, such as lower risk, as you invest in a mix of asset classes and industries instead of an individual stock. There is also an old saying suitable for passive investment: ‘ slow and steady wins the race.’ Therefore investing passively can benefit you if you know the market for a long time.
What Is Your Budget?
You might be wondering that a huge budget is necessary to invest. However, this is completely a myth. You can begin to invest in yourself with as little as $100. It depends on your budget, even if you want to invest more.
Opening Your Account
You can choose the type of account you want, depending on your needs. It is also directly proportional to your risk-taking capacity. An online broker will allow you to self-manage your account, including buying and selling a variety of investments, such as stocks, bonds, funds, and more complex instruments.
Currently, many applications on Google Play Store, such as Upstox, Growth, and Zerodha, are built for this purpose only. These apps will be easy to use and understand if you are a beginner.
If you are about to open an account for the first time, you don’t need to worry about the initial deposit as there is no such requirement. You can open your account with no initial deposit.
Your Risk Tolerance
If you are wondering how to invest in yourself, there are ample stocks you can invest in, such as growth, dividend, and value stocks. What suits you the most is directly proportional to your risk-taking capacity.
1. Dividend Stocks
A dividend can be defined as the distribution of a company’s earnings to its shareholders, which is determined by the company’s board of directors. These are distributed quarterly and may be paid out as cash or reinvestment in additional stock.
2. Value Stocks
Value stocks are usually considered undervalued in the market. Also, many investors believe that the market overreacts to any news, which results in stock price changes. These are usually issued by companies that demonstrate a high potential for development.
3. Growth Stocks
Growth Stock is usually anticipated to grow significantly above the market’s average growth. These often appear expensive, trading at a high P/E ratio, but such valuations could be cheap if the company continues to grow rapidly. As with great profits comes greater risks as well!
Final Thoughts
While you invest money, you should be very careful, especially if you are investing for the first time. Make sure you use a trusted source for investing purposes. Figuring out the right type of investment for yourself will benefit you in the long run, and your money will multiply. If you continue making smart decisions, you will be reaping its fruits soon.