Investing
I have other things I ought to be doing, but I miss blogging, and I finally have something I want to blog about. Here's a summary of things everyone should know about investing.
1. Everyone would be better off if they started learning about, and practicing, investing.
There's a lot of money languishing in savings and checking accounts that would serve its owners (and the economy at large) a lot better if it were invested. Investing is like telling your money to get off its lazy backside and get a job. That way, you have two incomes - yours and your money's.
2. Investing is not risky for everyone.
People read and hear all the time about how risky it is to invest in stocks, or in commodities, or what have you. As with anything else, there is some risk, because no one can know the future, but there is no more risk in stocks than there is in a checking account, unless you are ignorant of what you are investing in, or trying to get rich in a couple of weeks or less. Now okay, you might have heard about that guy that lost $5,000,000,000 of other people's money in less than a week because of investing mistakes. But what he was doing wasn't actually investing: it was gambling with things usually used for investing. Behavior such as his makes investing look risky to people who don't know the difference between investing and trading (which is point #5 or #6).
3. It's easy to educate yourself about investing.
There's a lot of free information available on the internet, tv, and radio, for people who are willing to find it, and read, watch, or listen for an hour or two per week. You merely have to want more from your money than immediate gratification (or 2% interest), and take a little time to do something about it. Some of my favorites: MSN.com>Money>Investing, Yahoo.com>Finance>Commentary (particularly Morningstar and Motley Fool, two usually subscription-required services that give free samples to Yahoo), and PBS' Nightly Business Report (but that's mainly because Paul Kangas reminds me of my late grandfather). It's quite possible you could find even better if you scour the web for free investing info.
4. Not everything you read (or hear) is going to be good advice.
Just because it's good to read something doesn't mean you should follow all the advice therein. Take a few weeks (or months) to get used to what you're reading. Some of the advice may even be great advice for someone else and be terrible for your particular situation. The important thing is that you're learning. It may also be important to keep in mind point #5:
5. Investing and trading are not the same thing.
The former is a way for your money to be productive for you and others; the latter is gambling. Investing, at its best, involves everyone prospering more than they would otherwise (you and the company you invested in). Trading needs a loser in order to have a winner. Investing in a stock means part ownership of the company that stock represents. It means entitlement to a share of that company's profits. Similarly, investing in a commodity signifies ownership of certain amount of corn, crude oil, gold, or what have you. Trading is an attempt to get rich from exploiting changes in stock prices caused by changes in the supply and demand of shares of companies. Much like investors, traders buy stocks or commodities; but unlike investors, traders are not interested in owning shares of profitable companies. They want only to sell that stock or commodity later for a tidy profit.
Now, if you buy a stock on the open market (NYSE or NASDAQ, etc.) someone else is selling it, so for you to succeed with that stock, the other person or institution is missing out. For one thing, that's on them (but that's what a successful trader would say about his victims) - more importantly, there is a very valid reason for someone to sell a stock that's going to provide a good return: he needs the money for something else (or an even better investment opportunity). So even if everyone practiced wise investing, there would still be opportunities to make good investments.
With all of that, I am not trying to say that trading is wrong. But it is a lot more like gambling than investing is, it is risky for people who don't know how to do it well (including most of the people who try it), and people have misconceptions about investing because they confuse it with trading.
6. There's more that everyone should know about investing.
But I'm too tired and bored to keep typing right now, so I'll come back to this later (maybe months later, if recent past experience is any guide).
SRS
1. Everyone would be better off if they started learning about, and practicing, investing.
There's a lot of money languishing in savings and checking accounts that would serve its owners (and the economy at large) a lot better if it were invested. Investing is like telling your money to get off its lazy backside and get a job. That way, you have two incomes - yours and your money's.
2. Investing is not risky for everyone.
People read and hear all the time about how risky it is to invest in stocks, or in commodities, or what have you. As with anything else, there is some risk, because no one can know the future, but there is no more risk in stocks than there is in a checking account, unless you are ignorant of what you are investing in, or trying to get rich in a couple of weeks or less. Now okay, you might have heard about that guy that lost $5,000,000,000 of other people's money in less than a week because of investing mistakes. But what he was doing wasn't actually investing: it was gambling with things usually used for investing. Behavior such as his makes investing look risky to people who don't know the difference between investing and trading (which is point #5 or #6).
3. It's easy to educate yourself about investing.
There's a lot of free information available on the internet, tv, and radio, for people who are willing to find it, and read, watch, or listen for an hour or two per week. You merely have to want more from your money than immediate gratification (or 2% interest), and take a little time to do something about it. Some of my favorites: MSN.com>Money>Investing, Yahoo.com>Finance>Commentary (particularly Morningstar and Motley Fool, two usually subscription-required services that give free samples to Yahoo), and PBS' Nightly Business Report (but that's mainly because Paul Kangas reminds me of my late grandfather). It's quite possible you could find even better if you scour the web for free investing info.
4. Not everything you read (or hear) is going to be good advice.
Just because it's good to read something doesn't mean you should follow all the advice therein. Take a few weeks (or months) to get used to what you're reading. Some of the advice may even be great advice for someone else and be terrible for your particular situation. The important thing is that you're learning. It may also be important to keep in mind point #5:
5. Investing and trading are not the same thing.
The former is a way for your money to be productive for you and others; the latter is gambling. Investing, at its best, involves everyone prospering more than they would otherwise (you and the company you invested in). Trading needs a loser in order to have a winner. Investing in a stock means part ownership of the company that stock represents. It means entitlement to a share of that company's profits. Similarly, investing in a commodity signifies ownership of certain amount of corn, crude oil, gold, or what have you. Trading is an attempt to get rich from exploiting changes in stock prices caused by changes in the supply and demand of shares of companies. Much like investors, traders buy stocks or commodities; but unlike investors, traders are not interested in owning shares of profitable companies. They want only to sell that stock or commodity later for a tidy profit.
Now, if you buy a stock on the open market (NYSE or NASDAQ, etc.) someone else is selling it, so for you to succeed with that stock, the other person or institution is missing out. For one thing, that's on them (but that's what a successful trader would say about his victims) - more importantly, there is a very valid reason for someone to sell a stock that's going to provide a good return: he needs the money for something else (or an even better investment opportunity). So even if everyone practiced wise investing, there would still be opportunities to make good investments.
With all of that, I am not trying to say that trading is wrong. But it is a lot more like gambling than investing is, it is risky for people who don't know how to do it well (including most of the people who try it), and people have misconceptions about investing because they confuse it with trading.
6. There's more that everyone should know about investing.
But I'm too tired and bored to keep typing right now, so I'll come back to this later (maybe months later, if recent past experience is any guide).
SRS
posted by weblogbob83 at 3:41 PM
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