Simple Investment Tips: How To Start

How to start with simple investments for your life.

With Social Security under scrutiny and retirement looming around the corner for baby boomers, many people have taken a renewed interest in investing. As with most endeavors, getting started in investing can be confusing. With that in mind, here are a few concepts to go by.

Assets and Liabilities:

Before making solid investment choices, we must first understand the definition of assets and liabilities. An asset is an item that grows in worth or value. Here is an example of a monetary asset: Lets say that you decide to buy a house. It is in a great neighborhood, and the real estate is "hot." The house is in excellent condition, and you buy it at a good price. After several years, the house increases in value at an excellent rate. At this point, you sell the house and make a greater amount of money than you have put into it. This house would be considered an asset to your investment portfolio.

A liability is an item that decreases in worth or value. Let's use the previous example: The house has been bought at a low price and sold at a higher price. This leaves you feeling good. However, lets take a closer look. During the time you owned the house, you decided to replace the roof along with adding an extra room. Any expenses the home incurs while you own it have to be taken into account when you sell it. If the original price plus the expenses add up to more than the selling price, then the house was a liability even though it increased in value. Remember, liability equals lost, and asset equals accumulate.

Growth and Value:

Growth and value are usually seen in stock descriptions, however we are going to apply them to other investment choices. A growth investment is one that grows steadily over time. These are usually more expensive, but they are purchased because they have a solid positive growth history. Another item that could be considered a growth investment could be your house; over the years, it continually accumulates in value faster than the expenses it is incurring. Now let's talk about value stocks. A value stock would be a stock that is under priced and shows the potential to grow, sometimes fast. Value stocks are usually considered more of a risk than growth stocks because value stocks don't have the solid history. Another investment that could be considered a value investment would be starting a business. The risk is in how business savvy you are, and how much potential you hold. If you do not have any business experience, but you have a great business plan, then you would be a value investment with high risk.

Different investment mediums:

There is an overwhelming amount of investment choices in the world. With that in mind, I am going to surf over two common choices. The most known investment is your home I.E. real estate. Let's talk about this a little bit. Buying a home could be one of your greatest growth assets to your portfolio. I say this because a house can be a value asset or a growth asset. A home that would be a value asset would be a "fixer upper." A home that would be a growth asset would be a home in an established neighborhood or an area that has a steady history of expanding. To determine where to buy your home, I would start with the area that you grew up in or an area that you are very familiar with. Remember, do not think buying a house is enough. You need to know if the area is increasing in value and if the economy is growing. These are factors that affect the house's value.

Another investment to consider is the retirement plan your company offers. These plans offer different risk levels and a good mix of growth and value assets to attain your investment goals. Professionals usually plan retirement plans, which give you a one up in the investment world.

Goals and Outcome:

First, review your budget and see what you can allocate to you investment portfolio. Then, write down investment goals such as a house, and retirement plan. Now, write down a timeline in which you will have these goals accomplished regarding how much money you can give to each goal. Next, take action. After you have started to build a solid investment foundation, with a few solid choices, you can start to look into higher risk mediums.

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