Investment Basics

There are some investment basics you should know before we go into detail into the investing world. People have this notion that only cash or cash equivalent can be used for investing.

Investment Basics

There are actually three types of investments a would-be investor could use in order to participate in an investment venture. These are Capital, Time, and Intellect.

Cash or cash equivalent is just a type of asset under Capital that most people are familiar with when they hear the word investing. We will discuss these in detail in another article.

Learning these basics will come in handy when you are thinking of jumping into investing. Like most people, if your position has been mostly in cash and you are considering increasing your exposure to the stock market, for example, it is always a great idea to revisit some of these basics to make sure you are less likely to lose money.

Do your Research

Investment basics #1: Make sure that you know about what you are investing in to begin with. Doing your research involves making sure that you know about the asset that you are purchasing before committing your money to it. For example, if you think about buying a stock in the tech sector, you should research it…the sector and the news surrounding that sector for the foreseeable future. This is one of the best ways to help you avoid making a bad investment.

Know Your Risk Tolerance

Investment basics #2: Not all people are risk takers when it comes to investing. Before you even put a single cent in an investment asset, decide what your Risk Tolerance is. The greater the risk, the higher the return. If your Risk Tolerance is low, you might be contented with the small return from CDs or Treasury Bills. Medium risk-tolerant investors could invest in Mutual Funds. For High Risks, High Rewards investor, Options Trading would be a good fit.

Know Your People Tolerance

Investment basics #3: Know your People Tolerance. There are investment assets like, a Business, for example, which requires a lot of interaction with people. Owning rental properties, depending on the type of real estate asset, may require little or greater people interaction. Whereas, investing in Options require zero involvement with other people. It is important for an investor to decide what people tolerance he/she is comfortable with. If you happen to get this wrong, you may end up being an unhappy investor.

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