You could have learned in this interview who I am and what am I doing. As you may know, I will publish regularly articles about investment on this website.
Probably, you want to invest your free money and see how they are gradually being valuated. So, where do you want to invest to? Shares, bonds, gold … STOP. We will also get to this with time – by the way, patience makes from investors real masters.
Human as a part of an investment
You may not even know about it, but you’re part of the investment. Just by having a current account in your bank. The bank may lend some of your finance to further subjects. Is that insolent? It’s reality – get acquainted. Ordinary accounts usually do not bring any interests, so you can have a savings account to obtain some interests, but it is nothing special, plus with some banks you must actively use the account to get the basic interests. Usual interests are around 1%, somewhere bit more.
How much money you need to start investing?
First, you need to understand how much money you can save on a monthly bases. If you don´t know it, it is the right time to make order in your finances. You need to deduct your costs of living and bills from your earnings and detach certain amount for your savings. This is the basic thing. We should also have a reserve for unexpected expenses on the current account.
If you had already made order in your funds and you have realized how you are managing your finances and how much you can save, we can take the extra savings and start to invest them. But never borrow any money for investment!
It pays off to start even with less money. For example with thousand dollars. It is important to start and begin gradually gaining experience.
In general, all ideas from previous paragraph are called financial literacy, but I do not like to use this term. Ministry of Finance of the Czech Republic defines financial literacy with terribly lengthy sentences and professional expressions that no one understands to. But there are also some important sentences on their web site about why we should be financially educated:
- To not make depths to your family
- To not let your money be stolen
- To not get lost in the world of finance.
- To be able to evaluate your finances.
- To make you smarter.
What is an investment?
Investing is an activity where you put money into capital (financial or human), and in the future you expect gain from this capital. You simply not spend your money (savings) now, to save more for future spendings (future benefit).
” An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Intelligent investor, Benjamin Graham
“Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.”
From the book Where Are the Customers’ Yachts?, Fred Schwed jr.
Investing is often confused with speculation and trading. These are completely different things, remember this at first.
Look around and explore the terrain. Discover individual products, read all lines written in small letters and be curious. Making order in your own finances is the basic. Investing begins with savings. Once you’ve created a reserve, you can invest the rest of your funds according to your neds. In the next article, let’s look at the best investment you can make in the beginning – investing in human capital.