To learn informed investing and know how to invest with confidence, most people should divide the topic into two parts: investing and investing basics. By tackling the topics or articles in the following order, you can learn how to invest money as an informed investor without wasting much time and effort.
First, learn basic financial concepts, terminology, and investing basics. Every investment in the world can be evaluated based on just a few simple characteristics. Don't invest money in anything until you know whether it suits your needs for things like safety, liquidity, growth and income. Only if you invest wisely can you avoid costly mistakes by choosing an investment that is not right for you.
Then, as a primary guide to investing, focus on stocks and bonds because that's where you're most likely to invest your money in the future. Once you have dealt with these securities, it is time to learn about the investment markets and how to invest in them. For example, if you don't understand the stock market, your knowledge of stocks is of little value in the real world of investing.
Learning all about mutual funds should be your next step and now that you know about stocks and bonds it shouldn't be difficult. After all, these securities are where most mutual funds invest money for their investors. Mutual funds are where most investors invest their money in stocks and bonds, in 401k plans, IRAs, and other accounts. There are thousands of funds to choose from but 99% of them fall into one of 4 general categories.
You should also become familiar with other investments such as money market securities and annuities before moving from the investment guide stage of your education to the investment guide section. In other words, before you can learn how to invest wisely, you need a clear understanding of all the major investment options and how they compare in terms of their basic investment characteristics. This is not as difficult as it sounds because the world of investing can be condensed into just 4 different asset classes or categories: cash equivalents (safe and liquid investments), bonds, stocks, and alternative investments.
Investing is the art of putting together an investment strategy and managing your money at a level of risk within your comfort level. Once you understand the investing end of things, you need a game plan as an overall investment strategy. Asset allocation is the most important part of any strategy; The allocation of your portfolio assets over time will be the main thing that determines your success or failure as an investor. Focus on learning asset allocation: how to invest money (in any proportion) in the four asset classes listed above.
Now you will also want to learn how to implement different investment strategies or tools to help you reduce risk while achieving above average returns on investments. The following are two important things to understand when starting the learning process. Learning to invest is easier than you think if you take it step by step in a logical sequence. Second, learning informed investing is actually a two-step process: learn the basics of investing, and then learn how to invest.
Don't be discouraged if you don't understand something in the investing article you're reading. Back up and find another article that covers the topic or area that confused you. For example, if you're confused by an article about bond funds, it's probably because you don't understand bonds in general. Most people don't do this. Most people don't get much from an adventure novel if they start reading on page 47.
Get rid of the fear and anxiety of investing. Learn how to invest with good information.
