It is always good to have at least a basic foundation for basic investment knowledge, whether you are a beginner to investing or working with a professional financial advisor. The reason is simple: You will probably be more comfortable investing your money if you understand the lingo and the basic investment principles. By combining the basics with what you want out of your investment strategy, you are empowered to make financial decisions more confidently and also to be more engaged and interactive with your financial advisor.
Below are a few basic principles that you should be able to understand and apply when looking to potentially invest your money or evaluate an investment opportunity. You will find that the key points regarding investing are quite logical and just require good common sense. The first step is to make the decision to start investing. If you have never invested your money, you are probably not comfortable making investment decisions or moves in the market because you have little or no experience. It's always hard to find a place to start. Even if you find a trusted financial advisor, it is still worth your time to educate yourself so you can financial advisor in bahrain participate in the process of investing your money and so you can ask good questions. The more you understand the reasons behind the advice you receive, the more comfortable you will be in the direction you have chosen.
Don't be threatened by the financial lingo
If you turn on the TV to some financial network, don't worry about not being able to understand the financial professionals right away. Much of what they say can actually boil down to simple financial concepts. Make sure you ask your financial advisor the questions that concern you so you become more comfortable when investing.
IRAs are containers that hold investment - they are not investments themselves
The first area of confusion that most new investors are confused about is their retirement vehicles and plans they may have. If an investor has an individual retirement account (IRA), a 401 (k) plan from work or some other type of pension plan at work, understand the differences between all the accounts you have and the actual investments you have within them draw. Your IRA or 401 (k) is just a container that houses your investments that brings some tax benefits.
Understand equities and bonds
Almost every portfolio contains these types of asset classes. If you buy a share in a company, you buy a share of the company's earnings. You become a shareholder and owner at the same time in the company. This simply means that you have equity in the company and the future of the company - ready to go up and down with the company's ups and downs. If the business goes well, your shares will go well and increase in value. If the business fails or fails, you may lose value in your investment.
If you buy bonds, you become a creditor for the company. You simply lend money to the company. So you do not become a shareholder or owner of the company / bond issuer. If the business fails, you lose the size of your loan to the company. However, the risk of losing your investment to the bond owner is less than the risk to owners / shareholders. The rationale behind this is that in order to stay in business and have access to funds to finance future expansion or growth, the company needs a good credit rating. In addition, the law protects a company's bondholders over its shareholders if the company goes bankrupt.
Equities are considered equity investments because they give the investor an equity stake in the company, while bonds are referred to as interest rate investments or debt instruments. For example, a mutual fund may invest in any number or combination of shares and bonds.
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