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Investing is like gambling in a lottery or in a casino. Take risks by investing and betting. As a result, the amount of money you invest can increase and decrease. However, the truth is that the risk of investing is incomparably less.
Also, unlike the game, adherence to basic investment principles can significantly reduce the risk of loss and increase the expected return. Consider two examples. Let’s say you spend € 20 a month on lottery tickets. This equates to € 240 per year or € 4,800 for 20 years. Will you win the pot of gold? Chances are extremely low.
At that time, the U.S. S&P 500 stock index grew by an average of about 8% per year, calculating the average return for the past 30 years. There are periods when returns are extremely low or even negative, but there are years when returns in the stock market are much higher. The longer the investment period, the more likely the return on investment is more similar to the long-term average.
You need to be an expert. Of course, there are complex financial instruments, but it is possible to start investing from relatively simple instruments: stocks, bonds, funds.
If you decide to invest in stocks, we recommend that you start with companies you know and first of all take an interest in companies that are listed on the Baltic stock exchanges. The company’s financial information is freely available, and you can easily find the most important news related to the company you are interested in on the stock exchange. Novice investors can spend money on funds that invest in a basket of different instruments, providing an opportunity to spread risk.
It takes a million to invest. Or other large sums that the common person finds without biting. This is another myth. Warren Buffett, one of the most famous investors of all time, made his first investment at the age of 11 by acquiring multiple shares, and was able to earn large sums of investment during an investor career spanning more than 7 decades.
An example is funds made up of a basket of different financial instruments. Suppose that ETFs are designed to track the value of the largest indices. You can start investing in them from a minimum amount, for example, 30 euros. It is true that you must take into account the applicable commissions, which can sometimes exceed the amount invested, thus reducing the return on investment.
I will keep the money for a long time. While long-term investing allows you to reap the benefits of cumulative returns and avoid market fluctuations, short and medium-term investments can also provide opportunities to take advantage of market opportunities and sell investments in a few months or years.
If you are concerned that money held in funds or stocks is not liquid, usually after the sale of a financial instrument, the money will appear in your account within a few days. It is important to remember that before making an investment decision, you should assess your current situation and needs and plan how long you can save money. If unplanned money is needed, the investment may need to be sold at an unfavorable time.
Investments must be constantly monitored. We all have work commitments, so the thought of having to track investments on a daily basis can be daunting. Today, digital technologies allow you to conveniently follow important financial news and make the necessary decisions “here and now.”
Therefore, it is enough to spend a few hours a week reading the news about the companies that interest you, reviewing their key financial indicators and other publicly available information. If you invest in funds, it is not necessary to follow the results of several companies, it is important to choose a reliable fund manager and, at least, occasionally, look at the results of the fund and remember to replenish the amount invested regularly.
There is an ideal time to buy. The prevailing belief is that in order to be successful in the financial markets, stocks must be bought when their prices are extremely low and sold when they peak. In search of the perfect opportunity, we can not only spend them, but also spend a lot of time, without achieving any tangible results.
The key is to start investing when financial opportunities allow and are determined to do so for as long as possible. The longer you invest, the easier it will be to resist the market fluctuations that occur, and with a periodic investment strategy, the value of the investment will tend to fluctuate relatively less.
I will invest and get rich quickly. Investing is a long-term activity that creates value for the economy and for you personally, but it is certainly not a quick way to make a profit. It is important to realize that the share price is increasing due to the growth of the companies themselves. And the growth of companies is determined by the growing economic activity in the state.
However, economic growth in countries is usually a small percentage per year, so many companies cannot grow at a tremendous rate. Of course, there are exceptions, but various schemes or offers to get rich quickly by investing in one or the other “promising” company often result in the loss of the total amount invested.
Over the years, one fact has been proven: markets reward the most patient.
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