Your First Investment

Thursday, March 7, 2013
It is the first time you invest your money and you have no idea of what is an investment?

An investment is an asset that produces money back for you. Basically it  means that in return of your capital the assets produce more money. Depending on the asset and performance you get, you expose your capital to a level of risk and the theory is the higher the risk, the higher is the return you'll get back.

These are basic features that an investor you should consider for your first investment:
  1. Control: Should I control my investments or should I go through intermediaries? How much this controls costs me?
  2. Risk: How much money I can lose?
  3. Volatility: The price of the asset has many variations? (Something very common in higher risk products)
  4. Liquidity: how quickly could sell the asset?
  5. Costs: The cost of buying, selling and managing the investment?

An investment can produce two types of income:
  1. Capital: When the price of the investment goes up in value.
  2. Income: When you receive dividends.

In any case I always recommend products that you can control with Internet through the online banking for three simple reasons:
  1. You get more interest
  2. They have less expenses
  3. You can control it at all times

Create passive income

Making a living from passive income is to control assets and create a system that operates automatically without any intervention on your part. But passive income will not get started "passively", unless you get an inheritance, of course.

We must begin to acquire assets and passive income will be the result. Before you make your first investment you must get the most important asset of all: your financial training. This the foundation that will allow you to build your system.

More tips for your first investment

Image courtesy of [Sujin Jetkasettakorn] /
To decide which financial product purchase start by study its evolution and seek for historical information. Look at the products that have evolved better in downturns in the financial markets, if it worked well in hard times, those are the good ones!.

When buying do not lean in prices: a lower-priced product can be at their most expensive moment. Do not rush, if in doubt choose safe funds to ensure a minimum return and in any case you will be putting your money back to work for you.

Many recommend diversifying to many financial product to minimize risks, but I see this as a problem that will hinder you from managing effectively your assets.

And finally, even if it is your first investment, do not get into the hands of a bank manager: he or she is there to collect their fees and make their own money, so their recommendations will remain influenced by their own interests.

How much should I invest?

I could not tell you much you should invest, just say what you can save the rest of the money into an emergency fund, which is always an investment anyway, but it will allow you to have enough cash for a project or something you want to buy without asking for a credit to get it.

Are you ready for your first investment?


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