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In the times we live in today, a world threatened by imperfect political systems, climate change, and economic interruptions from outbreaks and pandemics, personal finance is no longer something we can afford to ignore. According to Investopedia, personal finance is a term that covers managing your money as well as saving and investing. Smart personal finance involves developing strategies that include budgeting, creating an emergency fund, paying off debt, using credit cards wisely, paying for your children’s education, saving for retirement and more. Schools, even in the 21st century and in a country obsessed with wealth and capitalism, do not teach financial management, not even simple budgeting, at least, not for real life. Most of us also know next to nothing about investing and saving. And yet, there is so much talk on the Internet these days about multiple streams of income, passive income and making your money work for you.
Most of us are simply aware of investing as stocks and shares. Legendary investor Warren Buffett described it as “the process of laying out money now in the expectation of receiving more money in the future.” There are many different types of investments, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), bank products, options, annuities, insurances, retirement funds, education funds, cryptocurrencies, commodities, futures and etc. This list is by no means exhaustive and within each type, there might be sub-types that come with different terms and conditions. These days, with autonomous algorithms, you can also use robo advisors.
The Pennies Add Up
So, is it for everyone or do you need to have a few thousand dollars in your bank account before you can even start? Let’s say someone had $1000 in 2008, during the financial crisis and bought some stocks in companies that he knew. For example, Home Depot and Disney. In 12 years, that $1000, if untouched and not added to, would have grown to $4500. So, if you can manage to save $1000 and maybe can put aside $10 a week, you would be in a good place to start. For most of us, who live in the real world, where we have full-time jobs and bills to pay, a good place to start is penny stocks on Robinhood. They are affordable and accessible to retail investors.
But can you really make money? It really depends on you, your skillset and your goals. I don’t know about you, but every little bit counts and if I could buy my family an extra treat and have a little more extra that can be invested and saved at the end of the month, it would already mean a lot. For some reason, the movie, “The Pursuit of Happyness”, a 2006 biographical drama film starring Will Smith, based on the life of Chris Gardner, popped into my head.
Knowledge And Restraint
When we talk about investing, the following cautionary warning is absolutely necessary. Investments always involve risk and you should educate yourself and do your research before you buy anything. The good thing is that a lot of information is available online. The Internet has also made inquiries easy because you can now chat with robots and check search engines for reviews on accessible investing platforms. A little tip, every time you search for something online, type in “reviews” at the end of your text. When the search results appear, look for the ones that are neutral and that already have a lot of reviews on their records. That way, you avoid the paid ads. You can check historical highs and lows, what experts are saying about the companies and their shares and look at patterns and market trends. If you are new, you should start small and not be too greedy. The line between taking calculated risks and gambling is a thin one — separated by knowledge and restraint. Another tip is to buy what you know and are familiar with, which almost always means excluding stuff like futures, options and commodities. Leave that for the players who can afford to lose big.
Despite the caution, there is no need to be dismayed, buying stocks and shares is simply another life skill, like learning to play the guitar or change diapers. It will get better with time, and you can always pretend-play first. Put the figures down in a notebook or an excel worksheet and follow the numbers. Once you have had some practice and you think you are ready, then take the plunge. Unless you are planning to be a trader, it is not necessary to look at the ups and downs every minute. In fact, I would actually discourage that because that usually makes people anxious. Look at stocks as simply another item you are buying for your family, you want it to be good and to last, that is, to be able to give you good returns for a long time. That is why you should take your time, do your research and choose a good stock.
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