Why and where should I invest?
The financial market always goes through periods of growth and decline. Well-informed investors can make money in either of these markets. Investing is becoming easier than ever for the average American to participate in. With the growth in financial investment platforms in recent years, we believe that there is no better time than today to begin investing. However, there is more to investing than just the stock market.
Common types of Investing
Stock Market
When most people think of investing, the stock market is usually brought up. The stock market is a marketplace of buyers and sellers of business ownership. This type of investing is very technical and risky.
Treasury Bonds
Treasury bonds are a popular way of investment and can be very reliable. Bonds are backed by the government, making a loss in money very unlikely. The downside to this style of investment is its long time before payoff.
Interest Rates
Interest rates are extremely common ways of investing, and something that most of us do without even realizing it. By storing money in a bank, they offer interest rates for holding money there. However, there are ways of maximizing these interest rates for ideal return.
Learn:
General Market Conditions
The market is always volatile, but when stepping back, an investor can see the big picture. Factors like unemployment, GDP growth, war, political unrest, government spending, and regulations all play factors in market-wide changes in stock values. Good market conditions fosters an environment of growth, while instability in foundational elements creates instability. A market that is "bullish" is one that is optimistic of the future. Meanwhile, a "bearish" market is one where investors are more pessimistic of the market. Individual investors can have different bear vs bull attitudes in the same market. When most investors are "bullish", that means that there are likely more investments or flow of money into the market because of growth expectations. However, in a "bearish" market, there is likely less money flowing into the market as the attitude towards growth is more critical.
Overall, keeping up with politics and government can be beneficial for investors to stay on top of changes in the market. There can also be different attitudes in different industries. For example, Biden's Green New Deal made many investors very "bullish" in the renewables and green tech industry. Extreme growth in these stocks followed the legislative changes, which is just an example of the impact of the general market on individual stocks.
Stock Market
The stock market is composed of a marketplace of companies, where you can invest money to purchase partial ownership of a company. At its core, stocks are a part ownership in a given company. Common ways of investing in the stock market include simple stock purchases, fractional shares, and options trading.
Stock purchases and fractional shares both mean that the investor owns a share in a company. However, fractional shares have risen to increase stock market equity by allowing lower portfolio value investors to buy a fraction of expensive shares. Fractional shares are beneficial for everyone since it gives the average person a slice of the metaphorical cake, and it increases monetary investments in those companies.
Options trading is one of the most risky forms of investments where an investor "bets" that a stock will rise or fall in value in a certain period of time. As the riskiness of the purchase increases, the chance of either gaining or losing larger percentages of money occurs. A "call" gives the investor the right to purchase a stock at a given price until an expiration date while a "put" gives the investor the right to sell a stock at a given price.
When looking at a stock graph, how do you know what to look for? It is very challenging to make money off of stocks if the investor does not know what to look for. While the world of financial analytics goes very deep, there are some key pointers to increasing an investors chances of success. Performing deep research into these topics can deeply help an investor take it to the next level.
Lines of resistance and support. These are lines that show the realistic borders to growth and declines given the trends.
Knowing factors of risk is importance to consider when making a decision. Some of these include stock splitting (when a single stock turns into more stocks based on a factor), dividends issuing, earnings reports, interest rates, industry news, political policies, the economy, product obsolescence, product releases, and many more factors. To maximize an investor's chances of success, research into companies is very important as well as research into the economic climate and state of the industry.
As an investor becomes more knowledgeable, there are many sophisticated ways of testing a stock. For example, standard deviation, ADX, parabolic SAR, MACD, signs of reversals, Bollinger bands, Fibonacci retracement, islands, hammers, Aroon Oscillator, RSI, stock momentum, Stochastic Oscillator, head and shoulders method, OBV, A/D line, McClellan oscillator, and many more. While many or all of these terms may sound foreign, research and education in indicators like these can help an investor make more educated decisions.
​
Treasury Bonds
Treasury bonds are long term investments backed by the US government. That means, the United States government guarantees your money. The only way that (while staying the whole period of time with the bond), money would be lost is if the US government is not able to pay money back to anyone, which is highly unlikely. The investor would be loaning the government money for anywhere from 20 to 30 years. The bond earns interest over time until maturity (end of the bond's life). An investor can hold the bond until maturity or sell it before then. This investment type is very stable and reliable, but takes a long time for returns on investment.
Interest Rates
Interest Rates from banks are slow earning ways of guaranteed return. Since banks have their money guaranteed by the US government, an investor's money is safe in the bank. While most people receive a very small percentage of interest from their saving accounts, there are high yield saving accounts. Higher yielding saving accounts can have annual interest of 3-5%. While not life changing numbers, in normal economic climates, these accounts can help match or overcome the rate of inflation. Another type of saving account is a certificate of deposit (CD), which makes an investor's money untouchable for a predetermined period of time. While it locks the money away, banks are willing to pay higher interest rates for being able to hold money for a guaranteed period of time.​