Investing is often a long-term and less often a short-term investment with the aim of making a profit. It can be like financing a new startup or buying shares in companies, after which the investors get a part of the profit (dividends). Profit can be made by projects that are developing and this period is unlimited.
Basic concepts and knowledge
For professional investing and building an investment strategy, you need financial literacy, and the knowledge for investing includes knowledge of basic terms:
A share is a security of a company (CBK), a part of a company that entitles you to a share of profits and ownership of companies. In rare cases, the right to vote in decisions.
Stock analysis – collecting and processing data about a company to calculate the value of a single share or a certain share of the company.
Stock exchange – institutions for buying and selling shares and other securities.
Dividends – profits from a company’s stock.
Income – total profit from salaries, bonuses, stock growth, etc.
Portfolio – a set of shares of one or more companies.
Controlling interest – the majority of shares (usually 51%+), which gives the right to decide all issues of the company personally.
Profitability – a percentage indicator of profit and income.
Marketplace – the realm of commerce in the physical or digital world.
Board of Directors – a group of company executives.
Portfolio management – buying and selling stocks.
Financial awareness is a person’s knowledge of financial news and market situation in the micro-macroeconomic world.
Finance – all monetary resources, analogous to the word “money”.
Fund is an institution or sum collected from contributions of legal and physical persons, organizations.
There are other terms besides these, but these are the main ones.
Why invest in shares?
Investing in shares is a more reliable investment, because the company already exists, has not gone bankrupt immediately, so the risks are lower than in a new startup.
But stocks as an investment are long-term investments, because for low risks and reliability you have to put up with the fact that the profit from pulp and paper companies is up to 12% per annum. However, it is extremely rare for companies to go bankrupt overnight. And besides dividends, CBKs grow in value, outpacing inflation in developed countries. Even for a beginner, income in the market is virtually guaranteed. For example, if you compare the shares of the 500 largest and publicly traded companies in the U.S. (S&p500), over 5 years they have grown 57%, and over the last year by 18.4%. Many investors are multiplying their finances:
Mark Zuckerberg – founder and head of Meta (formerly Facebook) bought Instagram for $1 billion in 2012. In 2014, the price of Instagram was 35 billion, in 2018 the company was valued at 100 billion. Hence, the growth of its price in 2 years was 3500%, and in the next 4 years about 300%.
Peter Thiel put 10.2% of Facebook’s CBC into his investment portfolio in 2004. He spent 0.5 million and in 2012 his stake was worth 1 billion!
Ronald J. Wayne is one of their founders and held 10% of Apple’s shares. In 1987, he sold them for $800 and for $1,500 he signed a waiver of all claims against the company. 2300 dollars then, the equivalent of 10-12 thousand now, but had he kept the stock, it would have been worth 35 billion in 2011 and 300 billion in 2021!
Dealing with risks and rewards
Investing is not a hobby, to invest with income you need financial literacy, or else 1% of all companies have been around for more than 10 years, and unsuccessful investors are left to their own devices, at best.
Objectively, young corporations are more risky, although growth at first is higher, but it is unstable and the company can go bankrupt in the first six months. Also, the viability of any enterprise depends on the presence of competitors, who often squeeze new players out of the market.
Even profitable companies are at risk. For example, Apple made a profit of 400 million in 1995 and lost 1.86 billion in 1996-1997! The stock price fell 5 times, the company was already 20 years old. And this is the Apple that in 10 years would release the first iPhone.
Dividends are profits that the shareholders receive, but they do not receive all the profits. Up to 100% of the profit can go to the development of the company. What to do with the profit is decided by the board of directors. For example, Warren Buffett advises to invest as much profit as possible in the development of companies, and to pay less on dividends. In this case, the price of shares also grows in value and their resale can bring good income. And the risks depend only on the current, not global, market situation.
How to start investing
To start investing you need to collect a certain amount of money, a portfolio. It is best to start saving 5-10% of your income. Shares can cost up to 500 dollars and even more. With the average salary in Ukraine in 2023 – 500 dollars, if you save 5-10% for a year it will be 300-600 dollars. And buying securities of one company is a huge risk, so you should turn to ETF fund. These funds buy shares and split them. You can invest in such funds even with a small portfolio.
Such funds will soon start to deal with cryptocurrencies, i.e. split expensive cryptocurrencies, such as Bitcoin, which is currently worth more than $25,000, and Etherium with a token price above $1,500.
You can buy safe cryptocurrency in our service “AnyExchange”. Trading is more often a short-term investment, like arbitrage – within a few hours.
But if you like forex, we can deliver cash by courier directly to you, even to another country and foreign currency.
Remember that all financial transactions should be treated wisely: Before any investment, even small and short-term, you need to study the market and the companies in which you will invest. You can start with social trading: Repeat the actions of an already successful investor and team up with other small investors.
The importance of education and planning
Successful investing requires a strategy or tactic, besides, there are no such things that will always work. How do you learn different trading strategies? – Only through education, including self-education.
Education (not necessarily higher education, but at least special education) will give you an advantage, even if not in investing, then in finding a job. If an educational institution does not give you the necessary knowledge, you can learn to learn how to invest, learn to understand the market, self-educate yourself in parallel with your studies or work.
Strategic planning – implementing and executing programs and taking action or making a plan to accomplish tasks. In educational institutions this skill can be honed, because you will have to prioritize, make plans and make adjustments to them, in accordance with the situation. Also there you can start your way, learn the basics of investments, get a little experience that will not be meaningless or superfluous. Risks and stocks will not be something new to you.
Besides, many successful people started their way in higher education, even if they didn’t finish it, there they found a team and future partners, discovered their talent and previously hidden skills. Although 87% of multi-billionaires have higher education (Ilon Musk, Warren Buffet).
Conclusion
Investing can make you rich or wealthy for the rest of your life, because many famous investors live on dividends from stocks and do what they love. But they first studied this issue for a long time, learned to feel the market, understand all the intricacies of stocks and make investment decisions. They took it seriously, as a new job, not just a pleasure or hobby. They even created a new profession called investor.
They learned from their mistakes. But you can follow their example, build on their experience, and choose a similar strategy or improve upon it. You will be able to avoid their mistakes and achieve results faster.
