Investing for Beginners: The Complete Investing Full Guide for 2019

Investing for Beginners: The Complete Investing Full Guide for 2019

So you have decided to start investing. congratulation! Whether you are just starting on your own, in the middle of your career, approaching retirement age, or between your golden years, this means that you have started thinking about your financial future , And how can you manage your capital in a more prudent way so that it can work for you.
Investing for Beginners: The Complete Investing Full Guide for 2019
Investing
Nobody starts a specialist, and even the best investor in the world once sat where you are.

Let's start with two basic questions:


  • Where should you start?
  • How do you start?

If you are facing an array of income (P / E ratio), market capitalization, and return on equity to scare investment conditions, then in particular, those two inquiries can be challenging. But starting with investment is not as scary as it might seem.

The first investment step is to find out what type of asset you want

Let's start with this fundamental truth: At its core, the investment is about to withdraw money today with the hope of getting more money back in the future - for the time being accounting, adjusting for risk, and factoring in inflation, a satisfactory The result in the campus is considered to be "good" investment compared to the annual growth rate, especially the standards.

This is actually; the heart of the matter. You keep cash or assets in the hope of returning more cash or property, tomorrow or next year, or until the next decade.

Most of the time, it is obtained through the acquisition of the best productive properties.

Productive assets are investments that throw surplus money internally with any kind of activity. For example, if you buy a painting, then this is not a productive asset. After one hundred years from now, you will still do only painting, which can be of less or more money. (You, however, may be able to convert it to a semi-productive property by opening a museum and setting an entrance fee to see it.) On the other hand, if you buy an apartment building, you will not have only buildings. But in that century all the cash that is generated from rent and service income Even if the building has been destroyed after a decade, you still have cash flow from a ten-year operation - which you could use to support your lifestyle, was given for charity, or other opportunities. Was reinvested in


Each type of productive property has its own pros and cons, unique quirks, legal traditions, tax rules and other relevant details. Broadly, investing in productive assets can be divided into some major categories. Let's go with the three most common types of investment: stocks, bonds and real estate.

Investing in Stocks

When people talk about investing in stocks, they usually mean investing in common stock, which is another way of describing business ownership or business equity. When you hold equity in a business, you are entitled to a portion of the profit or loss generated from the operating activity of that company. On a holistic basis, equity has historically been the most rewarding asset class for investors willing to invest money over time, without the use of large quantities of leverage.

At the risk of oversizing, I like to think about the private equity investment coming in a two flavor - a privately held and publicly traded business.

Investing in privately organized business: These are businesses whose shares do not have any public market.

When started from scratch, they can be a high-risk, high-reward offer for the entrepreneur. You come with an idea, you establish a business, you run that business so that your expenses are less than your revenue, and you increase it over time, ensuring that you not only But rather that you should behave properly while enjoying the good returns of your capital, as well as more than what you can earn from idle investment. Although entrepreneurship is not easy, being a good business owner can put food on your desk, send your children to college, pay your medical expenses and allow you to retire comfortably.

Investing in publicly traded businesses: Private businesses sometimes sell themselves for external investors, known as an initial public offering or an IPO. When this happens, anyone can buy shares and become the owner.

The types of publicly traded shares may vary depending on many factors. For example, if you are a type of person who likes companies who have stable and cash cash flow for the owners, then you are probably going to be ready for blue-chip stocks, and even dividends Investment, dividend growth can be an affinity for investment, and value investing.


On the other hand, if you prefer the aggressive portfolio allocation method, then you may be ready to invest in stocks of bad companies, because a slight increase in profitability can lead to a big jump in the stock market value. .

Investments in Fixed-Income Securities (Bonds)

When you buy a fixed income security, you actually lend money to the bond issuer instead of interest income. There are ways in which you can do this, from purchasing deposits and money market certificates to corporate bonds, tax-free municipal bonds and US savings bonds.

With stocks, many fixed income securities are bought through a brokerage account. By selecting your broker you will have to choose between a discount or full-service model. When opening a new brokerage account, the minimum investment can vary, usually from $ 500 to $ 1,000; Often for IRAs or education accounts. Alternatively, you can work with a registered investment advisor or asset management company that operates on a supportive basis.

Investing in Real Estate

The real estate investment is almost as old as the human race. There are many ways to invest money in real estate, but it usually comes down to developing something and selling it for profit, or to be a master of something and use it in exchange for rent or lease of others. is. For many investors, real estate is a way of wealth because it lends itself to leverage more easily. It can be bad if the investment is cheap but, if applied on the right investment, at the right price, and on the right terms, then it can allow a lot of people without a net worth to accumulate resources faster, A big asset base compared to the control he or she could otherwise afford.

There may be some disadvantage for new investors that real estate can be traded like stock. Generally, this happens through a corporation which is eligible as a real estate investment trust or REIT. For example, you can invest in the Hotel REIT and you can collect your share of revenue from guests checking at hotels and resorts, which make the company's portfolio. There are many different types of REITs; Apartment Complex REIT, Office Building, REIT, Storage Unit, REIT, REIT, which specializes in senior housing, and even the parking garage REIT.

The next investment step is to decide how you want to become the owner of those assets.

Once you settle on the asset class, which you want to do yourself, then your next step is to decide how you can take it. To understand this point better, let's look at business equity. If you decide that you want a publicly traded business, do you want to buy shares through a lump sum, or a deposit structure?

Lump sum ownership: If you opt out of lump-sum ownership, then you are going to buy direct stock of individual companies. A certain level of knowledge is required to do this right.

To invest in stocks, think about them, as you can do in your personalized businesses, and remember that there are three ways you can invest money in a stock. Absolutely, this means that you are concentrating on price relative to the value-adjusted cash flow that is generating assets. Calculate enterprise value, calculate gross profit margin and operating profit margin and how to compare them to other businesses in the same area or industry. Read Income Details and Balance Sheet. Look at Asset Management companies who hold large stocks, so that you can find out the type of co-owners you are working with.

Pooled ownership: A large percentage of general investors do not directly invest in shares, but rather, through a pooled mechanism such as a mutual fund or exchange-traded fund (ETF). You combine your money with other people and buy ownership in many companies through a shared structure or entity.

These pooled mechanisms can take many forms. Some wealthy investors invest in hedge funds, but most individual investors opt for vehicles like exchange-traded funds and index funds, which make purchasing a diversified portfolio at a much cheaper rate than they could on their own. . The negative side is of total loss of control. If you invest in ETFs or mutual funds, then you are for the ride, outsourcing your decisions to a small group of people with the power to change their allocation.

The third investment step is to decide where you want to put those assets

After deciding on how you acquire your investment assets, your next decision relates to those investments. This decision can have a big effect on how your investment is taxed, so it is not a decision to be done lightly. Your choice includes taxable brokerage accounts, traditional IRAs, Roth IRAs, simple IRAs, SEP-IRA, and perhaps family limited partnerships (which may have some property tax and gift tax planning benefits if applied correctly) .

Let's look at some broad categories in a nutshell.

Taxable accounts: If you opt for a taxable account, such as a brokerage account, you will pay taxes on the way, but your money is not nearly restricted. You can spend it even when you want at any time. You can cash it and buy a beach house. You can add it as much as you want, without any limit. This is the last in flexibility, but you have to give Uncle Sam his cut.

Tax shelter: Retirement schemes such as 401 (k) or Roth Ia provide many tax benefits. Some are tax-deferred, which (usually) means that when you deposit the money into the account, you get tax rebates, and then pay taxes in the future, from which you will be able to pay the tax-deferred year After the year gets. Other people are tax-free, which means that you give them funding with post-tax dollars (Read: you do not get a tax deduction), but you never get an investment benefit generated within the account, or once Pay taxes on the amount of money. Later, take it back in life. Good tax planning, especially at the beginning of your career, can mean a lot more money on the road because the benefit is compounding on its own.

Some retirement plans and accounts also have property conservation benefits. For example, some have unlimited bankruptcy protection, which means if you are suffering from a medical disaster or any other incident that wipes your personal balance sheet and forces you to declare bankruptcy Your retirement savings will be out of reach of creditors. They have the limitations of the security of others' property, but they still reach the seven-figure.

Trust or other asset protection mechanisms: Another way to keep your investment is through institutions or structures such as Trust Funds. There are some major planning and property conservation benefits to use these special ownership methods, especially if you want to restrict how your capital is used in some way. And if you have a lot of operating assets or real estate investing, then you may want to talk to your attorney about setting up the holding company.

An example of how a new investor might get started

With outlines from the way, let's see how a new investor can really start investing.

First, assuming that you are not self employed, the best course of action is likely to sign up for 401 (k), 403 (b), or other employer-sponsored retirement plans as soon as possible. Most employers offer some type of matching money to a certain extent. For example, if your employer provides 100 percent of the match on the first 3 percent of the salary, and you earn $ 50,000 per year, then that means you have withdrawn your payroll at the first $ 1,500 and in your retirement account , Your employer will deposit your retirement account to an additional $ 1,500 in tax-free money.

Whether or not your employer has a matching offer, however, you have to invest the money held in the account. Your 401 (k) might have a default option, but choose a mutual fund or other investment vehicle that makes the most sense for your future needs. As money is paired with each paycheck automatically in your account, it will be placed towards that investment.

After this, assuming that you fall under the income limit eligibility requirements, you probably would like to fund Roth Ira for the maximum contribution limit. That is $ 5,500 for a person under 50 years old, and $ 6,500 for someone who is over 50 years old ($ 5,500 base contribution + $ 1000 catch-up contribution) If you are married, in most cases, you can fund your Roth IRA. Just make sure that you invest the money you put in by - by default, the IRA provider will park your money in a safe, low-return vehicle like Money Market Fund, unless you direct them directly. Therefore, decide whether mutual funds, ETFs, or other investments that you want to keep your money.

Once you have taken care of such personal finance in the form of an emergency fund and paying the debt, you want to return to your 401 (k) and the balance (the limit already funded You are allowed to take advantage of that year, which is up to the overall limit. If this happens, you can start adding taxable investment to your brokerage accounts, maybe participate in direct stock purchase plans, get real estate, and fund other opportunities.

Conducted correctly on a long career and managed prudently with investment, it can increase its barriers to retiring comfortably fast.

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