Is it a good idea to invest? Is it right for you? These questions are simple enough, but if you think investing is too complex or if you feel that you don’t even know where to start, you’re not alone.
People who are thinking of investing for the first time are often afraid of losing more money than they make because they have no idea what they’re doing. As a result, they never start or just turn over their money to a brokerage and hope for the best.
If you’re thinking of investing, then you face a crossroad: on one hand, you could take the conventional route and buy stocks and bonds; on the other hand, you could take the unconventional route and look for unusual investments like fine art or numismatics.
Let’s take a look at some common questions: Why invest at all? How to start investing? Should you try a conventional or an unconventional approach?
Why Invest at All?
If you never invest at all, then you must exchange your time for money. This, of course, is perfectly fine, but there are two major drawbacks.
- You may not be earning a high income. As a result, you have to work more than you would like to pay for your living expenses and earn much less than you need.
- You are exhausted from spending all your time working and would like to take a break and spend more time with your family.
When you invest, your money makes money. What’s more, you will often get leverage in some financial markets, which means that your money will buy you more assets. Additionally, you can always reinvest some of what you earn so that you are continuously playing with a larger sum. In the long run, then, you end up making far more money as an investor then you ever could through your labor.
How to Start Investing?
Although every field of investing has its own rules on how to get started, there are some general rules that apply to almost all types of investments:
- Study. The more you know, the easier it will be to do well. So, you need to embark on either a formal course of training from an expert or self-study. Ideally, you should do both. An online or offline course led by a successful investor will help you to learn the basic concepts. Self-study will help you deepen your understanding.
- Make small bets. Avoid getting too excited about how much money you can make and put in too much money. Since you are new, you will likely make mistakes. So, start small and increase the size of your investments based on real-world feedback on how well you’re doing.
Conventional or Unconventional Investments?
In truth, either could work for you. The secret to deciding is based on your interests and talents. Let’s take a look at two examples from both types of investments.
Conventional Investment: The Stock Market
The stock market is the exchange where stocks and bonds are bought and sold. The most common strategy is to buy a stock, hold it for a while, then sell it at a higher price than you paid for it.
The advantage of the stock market is that you have a situation of unmatched liquidity and can make a large amount of money in a small amount of time. Meanwhile, the disadvantage is that the market can be volatile and that you can lose money. In the worst-case scenario, the stock market crashes.
Unconventional Investment: Fine Art
The fine arts market is buying and selling art made by late or contemporary artists. Usually, as the artist’s fame rises, the value of the artwork multiplies exponentially.
The advantage of the art market is that you have a situation of rare art acting as a hedge against inflation. The art you own is fast to rise but slow to fall in value. The market is also easy to access and investing can be fun. Meanwhile, the disadvantage is that the market is high risk in exchange for high returns, your assets are illiquid, and if you buy too much, you may have problems with storage.
In conclusion, investing is one of the most effective ways to deal with the rising cost of living. Due to a number of macroeconomic factors, the income you earn rises at a much slower rate than the cost of goods. As a result, you are working harder to stay in the same place. Investing gives you a fighting chance against the rising cost of living.