Inve$t & Grow: Different Forms of Investment Explained - A Beginner's Guide
By Sam D. Gates
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About this ebook
This guide is intended for beginner investors and devotes a chapter to each type of investment explaining the type of investment, key terms, how profit is made, pros and cons, and how to get started.
The intention is to provide enough information for you to get acquainted with different types of investment so that you can either go on to further explore those that interest you or to take real steps to actually making investments. This will be different based on how much capital you have, your risk appetite, desire for learning, and your personal situation.
The final chapter provides a useful summary and comparison table so you can see what may be most applicable for you.
The forms of investment discussed are:
•Stocks / Shares
•Options
•Futures
•Cryptocurrency
•Forex
•Real Estate
•Bonds
•Funds
•Precious Metals
•Collectibles
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Inve$t & Grow - Sam D. Gates
Table of Contents
FOREWORD
INTRODUCTION
STOCK/SHARES
STOCKS AND SHARES DEFINED
HISTORY OF STOCK TRADING
TYPES OF STOCKS
STOCK TRADING
MAJOR CAUSES OF STOCK PRICE FLUCTUATION
HOW PROFIT IS MADE
STEPS TO START INVESTING IN STOCKS
STOCK EXCHANGE
TYPES OF STOCK EXCHANGES
PROS AND CONS OF STOCK TRADING
FUNDS (MUTUAL, INDEX & ETF’s)
FUNDS DEFINED
HISTORY OF FUNDS
HOW PROFIT IS MADE
STEPS TO START INVESTING IN BONDS
PROS AND CONS OF INVESTING IN FUNDS
OPTIONS TRADING
OPTIONS DEFINED
HISTORY OF OPTIONS TRADING
CAUSES OF OPTION’S PRICE CHANGE
OPTIONS TRADING STRATEGIES
THE GREEKS!
TERMINOLOGIES IN OPTION TRADING
STEPS TO START OPTIONS TRADING
PROS AND CONS OF OPTIONS TRADING
FOREX TRADING
FOREX AND FOREX TRADING DEFINED
HISTORY OF FOREX
MAJOR PLAYERS IN THE FOREX MARKET
THINGS TO KNOW TO START FOREX TRADING
FOREX MARKET TRADING SESSIONS
RISK MANAGEMENT IN FOREX TRADING
STEPS TO START FOREX TRADING
PROS AND CONS OF FOREX TRADING
PRECIOUS METALS
PRECIOUS METALS DEFINED
HISTORY OF PRECIOUS METALS
HOW PROFIT IS MADE
STEPS TO INVESTING IN FUNDS
PROS AND CONS OF INVESTING IN PRECIOUS METALS
CRYPTOCURRENCY
CRYPTOCURRENCY DEFINED
HISTORY OF CRYPTOCURRENCIES
TERMS IN CRYPTOCURRENCY
HOW PROFIT IS MADE
CRYPTOCURRENCY EXCHANGES
FACTORS AFFECTING CRYPTOCURRENCY’S PRICE
CLASSIFICATION OF CRYPTOCURRENCIES
SOME AVAILABLE CRYPTOCURRENCIES
STEPS TO START TRADING CRYPTOCURRENCIES
PROS AND CONS OF TRADING IN CRYPTOCURRENCY
COLLECTIBLES
COLLECTIBLES DEFINED
HISTORY OF COLLECTIBLES
HOW PROFIT IS MADE
STEPS TO START INVESTING IN COLLECTIBLES
PROS AND CONS OF INVESTING IN COLLECTIBLES
FUTURES TRADING
FUTURES DEFINED
HISTORY OF FUTURES TRADING
GOALS OF FUTURES TRADING
IMPORTANT PARAMETERS OF A FUTURES CONTRACT
TYPES OF FUTURES ORDERS
FUTURES PRODUCTS
TERMINOLOGIES IN FUTURES TRADING
STEPS TO START TRADING IN FUTURES CONTRACTS
PROS AND CONS OF TRADING IN FUTURES
REAL ESTATE
REAL ESTATE DEFINED
HISTORY OF REAL ESTATE INVESTMENT
HOUSE FLIPPING
IMPORTANT FACTORS FOR REAL ESTATE INVESTING
REAL ESTATE CROWDFUNDING
TYPES OF INVESTMENTS
REAL ESTATE CROWDFUNDING PLATFORMS FOR INVESTING
PROS AND CONS OF REAL ESTATE INVESTMENT
BONDS
BONDS DEFINED
HISTORY OF BONDS
HOW PROFIT IS MADE
STEPS TO START INVESTING IN BONDS
SOME TIPS FOR INVESTING IN BONDS
PROS AND CONS OF INVESTING IN BONDS
CLOSING THOUGHTS
FOREWORD
I have invested in many different forms starting with stocks to crypto more recently, combined with many different ones including property, bonds, collectibles, and precious metals in-between. Each offers something unique with different risk profiles and rates of return and timelines.
As I continued my investing experience I would regularly try and educate myself by searching for articles and reading books. As I did this, I realized how useful it would be for anyone starting to explore investing, if there were a guide that succinctly explained the different options. That thought inspired me to write this guide. It is intended for beginners to provide just enough information for you to get acquainted with different types of investing so that you can deep dive into whichever is of most interest and applicable to you. This will be different based on how much capital you have, your risk appetite, desire for learning, and your personal situation.
I really hope this guide provides a good platform and springboard for your investing goals. To your success.
INTRODUCTION
When considering investment, objectives should be considered to help determine which investment vehicle is appropriate at that time. Indeed, when I first started, I selected stocks as a low-cost entry vehicle. Had I been more familiar with some of the other options discussed in this book, I would have included collectibles and started researching options trading that much sooner. Later as I started working full time and had a steady source of income I started to invest in real estate.
Some of your considerations will be:
• Investment amount – this obviously will vary from one individual to another. The golden rule here is to only invest what you can afford to do without. This is a critical concept so let’s discuss this further.
If your available monthly income (i.e. after tax) is $1,000 and your expenses are $600 then you have $400 left per month. Investing all $400 a month would not be considered a wise choice. It leaves nothing for the unexpected car repair or purchase, home repair, doctor’s bill, or simply your entertainment such as a vacation. The same concept applies to any savings you have, resist the urge to invest all or most of it at any time – that will get you into a gambling mentality which is to be avoided.
So, what is the right amount? Well, only you can decide. When you start investing, start small, master the understanding, monitor and adjust and then revisit your investment levels. However, you should never be compelled to invest all of your after tax and expense cash. Never lose sight of the fact that your entire investment could, in theory, go to zero – this is a sobering thought and one you should remind yourself of.
• Timeline – your situation will be unique to you. Some of you may have just started your first job and are exploring the possibility of investing for the first time with a short or long-term view. Some of you may have a young family and thinking about saving to put them through college. Some of you may have already tried some investing and are not happy with the results or wish to try a more aggressive strategy.
Each situation requires a firm understanding and expectation of when to expect returns. This impacts how frequently you will check on your investments and make adjustments – the shorter your timeline, the more frequently you will check in. If you have a longer-term, then you should ignore short-term ebbs and flows of markets with the confidence that over time, your investments will grow (noting there are no guarantees).
However, it is important to have a timeline in mind so that you have a platform to be objective and disciplined in your investment goals and strategy.
• Risk Appetite – your risk appetite will influence the type of investment(s) you pursue. I have successfully traded stock options with monthly timelines for several years. However, with this type of investing you need to be extremely disciplined and be able to let losers
go and trust your methodology to pick more winners than losers so your portfolio continues to grow. Options trading certainly has more risk than investing in the underlying stocks or say property investment.
Your risk appetite will be determined by your financial situation, your timelines, and your personal situation. Regardless, it is highly recommended that for any type of investment, you go through a period of learning, monitoring, and adjusting. This can include note taking so you know why some things went well and some didn’t. Include dates and details so you can track back and form an opinion for improvement.
Be wary of the gurus
and experts
who offer courses for thousands of dollars claiming their sure fire
strategy is the one for you.
One thing I have learned from my investing experience is to not be stuck on any one type of investment. Indeed, that’s why I wrote this book – to provide a good base understanding of each type of investment so you can research more.
When using this guide, you do not need to go from start to finish. Each chapter discusses a different form of investing. In fact, you could actually start with the final chapter as that provides a useful table by comparing different types of investing. That can help you select which chapter to read.
STOCK/SHARES
STOCKS AND SHARES DEFINED
In financial terms, a stock is a unit of ownership of a company or asset. To raise capital, a company may choose to sell shares to investors, who then become shareholders in the company. Thus, shareholders have the opportunity to earn dividends in return, which is being paid depending on the share price and the company's overall performance.
There are several types of stocks, including common stock, preferred stocks, legal shares, bonus stocks, sweat equity stocks (where companies issue stocks at a discount or for consideration), and employee stock option plans.
A share is primarily security, an intangible asset in a company to which a specific monetary value is assigned. The level of this value depends on the success and failure of the company that is offering the shares for sale. In technical jargon, the ups and downs of companies are referred to as bull
(up) and bear
(down). With a share, you become an investor and acquire a small part of a company of your choice.
To put it more precisely, a share is a stake in a company that gives you a fraction of the company's share capital. The companies that issue shares usually have the legal form of a stock corporation. If they are listed on the stock exchange, these companies can sell shares in their company to the public through an initial public offering (IPO). The process of making shares available to broad masses is also known as issuing.
HISTORY OF STOCK TRADING
The Dutch East India Company is widely considered to