Investing isn’t risky, it’s just the investor who is risky. Investing is not just the game of money and luck but there is a complete education for that, which you could never get from your school. For that study you would first have to get some experience by investing or by just observing that how the market is working, have questions in your mind and then find the answers. In this article you would gain some basic knowledge about investing which is necessary for starting to invest.
Before i started investing, I read many books, articles and watched many helpful, knowledgeable videos but after all that knowledge, when I started investing I had many losses by which i gained experience about how things work, So what I am trying to say is that only knowledge isn’t enough, you would have to gain some experience and have some losses too.
So, the first thing you have to know is that there are many types of investments like real estate, stocks, businesses, commodities, etc. These all are called financial vehicles, and these all are different types of vehicles so you have to use all of them them at different financial stages. They are very similar to normal vehicles, like if you want to go at someone’s house in a different country you would use airplane to go to that country and then a car or any type of public transport to go to his house from the airport, you can’t just use one vehicle for all of that. The same is with investing, you would have to use different types of investments at different financial stages. The second thing is the difference between a sophisticated investor and an average investor. The difference is that the sophisticated investor looks at the risk by totally different way than an average investor. An average investor focuses on professional education(the education taught in schools) but the sophisticated investor focuses on the the financial education, Financial education is necessary for investing or starting a business, the education you were having in your school all these years was professional education which has no concern with finance and money. An average investor avoids making mistakes and a sophisticated investor understands that mistakes are aren’t bad.
Investment is not risky if you know the company or the real estate or the thing in which you are investing. No one will tell you where to invest because no one can. It completely depends on your experience and your observations which means that knowledge and experience is the key. One of the most important things in investing is that do not predict anything and just be ready for everything that could happen. Don’t just expect much from any investment.
You should know the difference between an asset and a liability. This is the most important thing you should know to live a financially independent life. It is not only important for investment or any business but also for your daily life. A liability is which takes the money out of your pocket for example your car, your bike, your computer(if it is not used for any type of business or investment). And an asset is which put money in your pocket for example real estate, stocks, businesses and business shares.
The question is that how does knowing the difference between an asset and a liability helps in reducing the risk of investment. Everything which is related to money in any way have some assets and liabilities, like every business, real estate, your house, your computer, your car, and even you yourself have assets and liabilities. By knowing the assets and liabilities of a business or real estate we can predict whether the the value of that business or what ever it is going to go up in the future or not.
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Co-founder of purchasium.
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