What is investment?
Investing and all that with this connected to it. Not write a lot of extra information that may not be necessary, unless you are not going to work, for example, as an economist, we will try to outline the most important points.
So, let's find out: What is the investment? This is any embedding of Finance for the purpose of earning income. For an investment of money today, there are many options. But to say you can not absolutely reliable all. Therefore, non-profit projects will not be considered, to avoid wasting time.
What does successful investing?
Making the investment, any investor expects that the funds in the future will operate at a profit. In our country, people tend to relate to invest very cautiously, considering that money is safely stored at home under the pillow: invested - then lost.
Yes, it really can happen in some cases, return the invested funds will not succeed. First of all you need to know: What is the investment? Investing - it is always a risky venture. There is no method in which the investment will generate passive income and will not be the slightest risk of losing them. Therefore, if someone would offer a win-win, then most likely it is a lie and a desire to lure money from you, because the risks are everywhere, especially in investing.
As David Nepo sec says, yet we must remember about this concept as diversification. Speaking more clear - "do not put all your eggs in one basket." Here is a concrete example. Suppose you invested somewhere $ 1,000, no matter where. Knowing the principle of diversification, you have divided this amount by ten parts by $ 100 invested into various objects. If even one of these projects will be unprofitable, you risk losing the entire $ 100. As a result, we can say that such investment is not bad, since the remaining 900 dollars invested in other projects, with a big plus cover losses formed. In the case when the entire amount of $ 1,000 would have been invested in the project unprofitable one, then the situation would have been abysmal. Here is the first principle of successful investing: do not put your money in one basket.
The second rule of successful investing
To understand what investing, consider one of his principle of success. For this, first let us recall an old tale, from which it is necessary to draw the appropriate conclusions. So ...
Lived a single farmer. Every day he took a chicken coop egg that carried the chicken. And one day, instead of the usual eggs, he found a nest of gold. The farmer was overjoyed wealth: he sold it to the egg and made a feast.
The next day, went into the chicken coop, he again found the golden egg. This was repeated for several days, every morning - a new golden egg. But the farmer was a greedy man and one golden egg it no longer satisfied. One day he was very angry with the chicken and stabbed her in anger. No golden eggs inside it was not. Goose that lays the golden eggs was lost forever.
How does all this relate to the investment? Know that such investment income generation and have your golden egg, and the invested capital - a chicken. Here is the second rule of investing: do not cut the goose that lays the golden eggs you.
This means that constantly investing and taking away all the profits, your passive income will not be as significant. So now let's talk about capitalization.
Investing - Financial Independence
Now let's talk that this investment from the perspective of capitalization. To understand in more detail the meaning of this concept, we start with its definition and consider a concrete example.
The capitalization rate is the investment funds in which the accrual of interest and the calculation is carried out not only on the main contribution, but also on the interest accrued previously. For example, if you invested $ 1,000 and received them with interest for the year was $ 200, the amount in the account was formed in 1200 dollars. Next year, interest will be charged for the amount already $ 1200, not 1000.
Now, using the principle of capitalization and time, look at an example: what is the investment will bring us a few years. Suppose you have made investments in the amount of $ 1,000 at 50% per annum (this figure is very real, as well as the acceptable level of risk). If you do not remove the interest regularly, after a few years we can significantly increase their capital:
one year - 1500 $
two years - $ 2250
three years - 3375 $
four years - 5 $ 062.50
five years - 7 $ 593.75
six years - 11 $ 390.62
seven years - 17 $ 085.93
eight years - 25 $ 628.90
nine years - 38 $ 443.35
Ten years - 57 $ 665.03
So, we can say that such investment really is the way to your financial independence. Proceeding from the principle of capitalization, we made $ 1000 in as many as 57 665 dollars! Capital of this size can generate annually about 29,000 dollars of passive income.
And, suppose that the initial contribution was $ 10,000, while 10 years later in the account would be half a million dollars. After 12 years, the amount will exceed one million, with which the passive income will be about 500,000 per annum. Impressive?
What is the amount required for investment?
Probably see our previous example, many think, "sorry, I do not have such amount of money." Many believe that to invest large sums of money are needed. This is a fallacy: for investment is quite possible to start investing with 1000. If you add a certain amount each month, then believe that this investment will result in a very good captain. Just start with something and the process will go.
Start - it's not hard, hard on what we do not start. Think about that statement and read more on nepo getanswers.
In concluding this topic, we recall once again that such investment? This investment of money in certain projects, companies and facilities in order to use the last of your money in their work and provide you with passive income.
Now, perhaps, many ask, "where do we get the money?" And finally, "where they invest?". This will be discussed in the following article is a continuation of the theme of investment.