UN Blog: How do I invest and how does investment work? and 2013-05-16 Russell Investments Center

Saturday, September 28, 2013

How do I invest and how does investment work? and 2013-05-16 Russell Investments Center

How do I invest and how does investment work?

I'm 18 now and I'd like to get some knowledge about investment and how it works.

Investment best answer:

Answer by Sean
There are different kinds of investments.

Bonds
Grouped under the general category called fixed-income securities, the term bond is commonly used to refer to any securities that are founded on debt. Bonds are similar to stocks, but are much more stable. If you are buying bonds from a stable government, your investment is virtually guaranteed. The potential to earn is lower, but so is the potential to lose.

Stocks
A stock is, essentially, you buying part of a company. The more "shares" you buy, the more of a say you have. You can vote at shareholder meetings, and you are entitled to a percentage of the profits. This comes in the form of a "price per share." If you buy 100 shares of an company, and then the price of the share grown by 10 cents, you earn $ 10. The downside to stocks is that the price fluctuates depending on anything and everything that happens in the business. The potential rewards are great, but so is the potential for loss. In order to make money, you need to research a lot first, and you need a little luck too.

Mutual Funds
A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, etc.

The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself.

And the most basic investment of all: Banks.

You can open an investment account, such as a Certificate of Deposit or a Savings account, at almost any bank. These pay interest on whatever your original investment was. You can actually be 100% sure how much money you will make before you even invest.

You can also invest in gold or other precious metals.

Some good sites to use for investing are Sharebuilder, E-Trade, or Scotstrade.