Investing

Investing is the process of buying assets that increase in value over

time and provide returns in the form of income payments or capital
gains. In a larger sense, investing can also be about spending time or
money to improve your own life or the lives of others. But in the
world of finance, investing is the purchase of securities, real estate
and other items of value in the pursuit of capital gains or income.

By investing your money regularly, you may be able to increase it

many times over with time. That's why it's important to begin
investing as early as possible and as soon as you have some money
saved for that purpose.

How Does Investing Work?

In the most straightforward sense, investing works when you buy an
asset at a low price and sell it at a higher price. This kind of return on
your investment called a capital gain. Earning returns by selling
assets for a profit—or realizing your capital gains—is one way to make
money investing.

When an investment gains in value between when you buy it and you
sell it, it’s also known as appreciation.

A share of stock can appreciate when a company creates a hot

new product that boosts sales, increases the company’s
revenues and raises the stock’s value on the market.
A corporate bond could appreciate when it pays 5% annual
interest and the same company issues new bonds that only offer
4% interest, making yours more desirable.
A commodity like gold might appreciate because the U.S. Dollar
loses value, driving up demand for gold.
A home or condo might appreciate in value because you
renovated the property, or because the neighborhood became
more desirable for young families with kids.
In addition to profits from capital gains and appreciation, investing
works when you buy and hold assets that generate income. Instead
of realizing capital gains by selling an asset, the goal of income
investing is to buy assets that generate cash flow over time and hold
on to them without selling.
Many stocks pay dividends, for example. Instead of buying and
selling stocks, dividend investors hold stocks and profit from the
dividend income.

Getting Started
Define your tolerance of risk

What's your tolerance for risk (the chance that you may lose money
while investing)? Stocks are categorized in various ways, such as
large capitalization stocks, small cap stocks, aggressive growth
stocks, and value stocks. They all have different levels of risk. Once
you determine your risk tolerance, you can set your investment
sights on the stocks that complement it.

Whatever your risk tolerance, one of the best ways to manage risk is
to own a variety of different investments. You’ve probably heard the
saying “don’t put all your eggs in one basket.” In the world of
investing, this concept is called diversification, and the right level of
diversification makes for a successful, well-rounded investment
portfolio.
Here’s how it plays out: If stock markets are doing well and gaining
steadily, for example, it’s possible that parts of the bond market
might be slipping lower. If your investments were concentrated in
bonds, you might be losing money—but if you were properly
diversified across bond and stock investments, you could limit your
losses.
By owning a range of investments, in different companies and
different asset classes, you can buffer the losses in one area with the
gains in another. This keeps your portfolio steadily and safely
growing over time.
Get some education
The next step is a bit of self-education. As with anything, the more
you know, the better decisions you’re going to make. Unfortunately,
financial literacy is not something that is widely taught and so you’re
going to have to take this into your own hands. Luckily, the internet
has near-infinite resources that can help you to upskill and learn
some of the basics of what investing is all about. Here are a few
resources to get you started:

https://www.investopedia.com/articles/basics/11/3-s-simple-investing.asp

https://www.youtube.com/watch?v=WEDIj9JBTC8

https://www.wealthsimple.com/en-ca/learn/investing-
basics#things_to_consider_before_investing

Decide on Your Investment Approach.

Once you have a basic understanding of some of the principles, it’s

then time to pick an investing approach. For simplicity's sake, we’ll
categorize these into active strategies and passive strategies. Active
strategies refer to when you are spending time and effort to do your
own research to make investment decisions yourself – rather than
using professional advice and curation. This is a great approach for
someone who has a good understanding of the market and has the
time and energy to deploy to looking for opportunities and acting
upon them.

Pick your asset classes

There are four main asset classes that people can invest in with the
hopes of enjoying appreciation:

Stocks
Bonds
Commodities
Real estate
Now you can pick which sorts of investments you’d like to make. You
can invest in a number of different asset classes and having
diversification across them is always a good idea. But at the same
time, you want to invest in things that you understand and believe in.

Stocks
A stock, also known as equity, is a security that represents the
ownership of a fraction of the issuing corporation. Units of stock are
called "shares" which entitles the owner to a proportion of the
corporation's assets and profits equal to how much stock they own.

Bonds
A bond is a debt instrument representing a loan made by an investor
to a borrower. A typical bond will involve either a corporation or a
government agency, where the borrower will issue a fixed interest
rate to the lender in exchange for using their capital. Bonds are
commonplace in organizations that use them to finance operations,
purchases, or other projects.
Bond rates are essentially determined by interest rates. Due to this,
they are heavily traded during periods of quantitative easing or when
the Federal Reserve—or other central banks—raise interest rates.

Commodities
A commodity market is a marketplace for buying, selling, and trading
raw materials or primary products.

Commodities are often split into two broad categories: hard and soft
commodities. Hard commodities include natural resources that must
be mined or extracted—such as gold, rubber, and oil, whereas soft
commodities are agricultural products or livestock—such as corn,
wheat, coffee, sugar, soybeans, and pork.

Real estate
Investment real estate is real estate that generates income or is
otherwise intended for investment purposes rather than as a primary
residence. It is common for investors to own multiple pieces of real
estate, one of which serves as a primary residence while the others
are used to generate rental income and profits through price
appreciation.
Brokers explained

A broker is a person/agency that facilitates transactions between

traders, sellers, or buyers. Think of a broker as a middleman who
ensures that the transaction can run smoothly and that each party
has the necessary information.

Best investing brokers

eToro
TD Ameritrade
Interactive Brokers
Fidelity Investments
Tastyworks
Charles Schwab

Mistakes to avoid
Speculating rather than investing: Investing is about long-term
growth and not short-term speculation. You should never be
investing in something because you think you can make quick
money. Focus on investments whose fundamentals are sound
and avoid things that seem too flashy, or too good to be true.

Starting too big: When you’re first getting started, there is no

need to go too crazy in the beginning. Start with small
investments to get your feet wet and then you can always expand
over time. Bulkestate is a great example because thanks to the
crowdfunding model, you can get in on exciting real estate deals
with a very small upfront investment.

Not having clear goals: If you haven’t set appropriate goals for
yourself, you have no idea where you’re going. Identify what
matters to you in terms of where you want to be in the future and
that will help you to clarify the investment decisions that you
need to make along the way to get there.