Investigating Investing

What is Investing? 

           Why do people invest?  Why do people even make a big deal over it?  What does it have to do with kids?  Well, I’m here to set you on the right path to figure out the answers tothese puzzling questions.

           Investing is when you use your hard earned money to make more.nbsp; Have you bever taken a risk?  Well, that is what investing is.  It is a big risk to start investing.  The more money you invest, the bigger the risk.  If you use the common tactic of Diversification,you take less of a risk in investments.nbsp; By using investments, you can make or lose a lot of money.

            When you think of investments, usually the first thing that you think of is the stock markets.  But there are also Bonds, Mutual Funds, and Cash Deposits, (CDs) and Money Market Funds.

Stocks

      The Dow Jones, NASDAQ and the S&P 500 markets are selling shares of a company.   A company sells stock to raise money, but does NOT promise to pay it back (this is the risk).  When a company makes a profit, it might share it with stockholders as a dividend.  That is one way to make money off a stock.  The other way is to sell your stock for more than what you paid for it.

Bonds

            Bonds involve loans of money to a company or the government.  The company or government then promises to pay back the loans by a certain date with added interest.  Bonds are a very low risk investment.  But again, larger bonds bring higher risks.

Mutual Funds

            There are more than 7000 mutual funds.  Mutual funds are collections of multiple bonds and stocks.  Mutual funds have many different goals and have reasonable risk.

Certificates of Deposits and Money Market Funds

            These are loans of your money to the bank for them to use for a certain amount of time.  After the time is up, they pay back your money and interest. This is very low risk because the amounts are stable.