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What is Investing?

In a world where nothing material is free, making money is a must for survival. We can work double — even triple — time just to earn as much as we need and want. However, we will realize that what we earn is still not enough. With this, we lose our time, our energy, and we still do not have enough!

It is true that making money entails a lot of hard work, discipline, and planning. We also must make sure that we plan for our future — because we are not going to earn through employment for the rest of our lives. Some people just opt to save their funds for their future through a regular bank savings account, which may not be enough. With the inflation snapping at our heels, putting our hard-earned in traditional bank products such as a regular deposit account is no longer enough to help us achieve our dream of having a financially secured and stress-free life. For you to be able to achieve this, investing has to be involved.

Why Invest?

Before we get excited to start our own investments, we should first determine what investing is and how this differs from a regular savings account. Investing is literally using the money proactively in order to make more money. This means making our money work for us. Investments give potentially higher returns than traditional bank products, and this may even provide a hedge against inflation. Thus, when it comes to saving vs investing, wiser people often choose the latter.

Though saving is less riskier, and this is often chosen by those people who are afraid to take risks, the interest that we earn for our money is very, very small. Though saving our money is more focused on the safety of the amount that we saved, we could never expect to enjoy more returns in the future. Thus, a regular savings account may not be considered as an income replacement in the future.

With investing, on the other hand, we are more focused on the returns that we get, however risky. Most investment advice that we get from the experts is to know how to measure the results of our investments through weighing the expected returns for investments against the anticipated risks.

Characteristics of Investing in Stocks

Understanding the stock market investing basics is very important to be successful with achieving our life-long financial goals. Investors must understand that there are some distinct characteristics which belongs to investing which separates it from saving. Three of the most well-known characteristics of stock investing are ownership, upside potential, and risk.

When we invest in stocks, it means that we buy part of the company — thus, we become part owner of such company. Such ownership gives us certain rights on the company, and we can enjoy our share of the company’s profits through dividends. In addition, owning stocks means participating with the growth of the company. This means that if the value of the company increases, our investments’ value will also rise. And of course, we must understand that there is also a potential for loss with investing and this is said to be much riskier. Thus, those people who cannot afford to lose their money because of such risks may not be ready for gaining as much profits as well.

The best strategy is to consult with a financial professional that will go over all your personal finances and help you develop a specialized financial and investment strategy for your individuals needs and situation. However, you must take action today – the longer you wait the more potential profit and money you will ultimately lose. Regardless of your age, you need to get started now – you can even take advantage of investing after retirement.

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It’s Not Too Late! - You can still open your IRA today and receive taxable deductions for 2015. Learn How