The New Investor's Guide to Making Money
In all my years of writing here, it should come as no surprise to you that the most frequently asked question is about making money from investments. After a few dozen times of being asked essentially the question by one person after the next, I figured it was a good time to write a guide explaining the basics of making money in each major type of investment, i.e. stocks, bonds, mutual funds, and real estate. No mater which type of investment you choose, making money really comes down to one simple formula: revenue minus cost equals profit. To learn more, let's get started!
Have you ever wondered how to get rich? To begin, there are four important keys that underpin my philosophy to making money and becoming financially independent. I wrote them out for you here in the hopes that you find them useful in your own quest for success. Take a moment to read over them, print them out, and think about them.
When it comes to investing in stocks, many new investors don't know how they can actually make money. They don't understand the difference between capital gains, dividends, and other sources of profit. If you're a beginning investor, don't worry! This short guide was written with the novice investor in mind to help you make sense of the potential ways you can start making money by owning stocks.
When it comes to making money, one of the oldest and most traditional strategies involves buying shares of stock in companies that return most of their profits to the owners in the form of cash dividends. Simply stated, the more stock you own, the more dividends you receive. In this brief introduction, I'll teach you how to begin making money from dividends and dividend investing.
When it comes to making money, bonds are one of the oldest ways known to man. In the most basic sense, you, the investor, lend some cash to a company or government in exchange for the promise of repayment and interest income. Unfortunately, in many cases it isn't that simple. There are actually two ways you can make money from investing in bonds, which most new investors don't realize.
As with stocks and bonds, in the world of real estate investing, there are only a handful of ways an investor can begin making money. In this overview, I'll help you understand the basics of real estate and show you how successful real estate investors work to maximize their profits.
A vast majority of Americans have invested in mutual funds, mostly through a 401(k) plan at work, a Roth IRA, a Traditional IRA, a 403(b), a SEP-IRA, a Simple IRA, or another retirement account. If you're about to invest in your first mutual fund, it is important to understand what exactly mutual funds are. Unfortunately, many new investors can't actually tell you what a mutual fund is, let alone, tell you how a mutual fund works or how you make money from a mutual fund. Grab a notebook and pen, and take a few moments to read this brief introduction. In it, I'll walk you through the basics of mutual funds and help you understand how investors make money investing in mutual funds.
Don't be frightened by exchange traded funds, or ETFs. Making money from ETFs is almost the same process as making money from mutual funds, which you learned about above. There are large numbers of ETFs available in which you can invest, but the source of your profit will ultimately depend on the type of investments owned by the ETF. In this article, I'll provide some insight and guidelines on typical ways most ETFs might make money.
If you've read through and studied the resources I provided in this article and you're ready to put your capital to work, before you take that step, there is one golden rule you must remember for the rest of your life: never invest money that you cannot afford to lose. You would be surprised to find out that many investors do not follow this simple tenant of investing. Even the greatest of fortunes can be lost overnight, so it is wise to keep a nice cushion of cash and resources on hand that can pay for food, shelter, clothing, medical care, and any other living expenses for an indefinite period of time should such calamity arise. Learn more about this investing rule as well as the importance of saving your money in this article.