The meaning of investments

What does investing mean to you? For many, this is a term that they will have been familiar with since childhood. There may have been time spent at home listening to parents or other family members discussing investment decisions.

That’s the type of learning experience that can be surprisingly constructive and useful. Although the imagination may suggest that listening to the odd few pieces of conversation about stock market indices and balance sheets will have had a very limited benefit, that needn’t be so. A child can pick up much, in terms of the language, concepts and even acronyms that are in common use.

But this is not to say that it’s critical to start an investment journey at a young age. It may prove useful to be immersed in a world of business and enterprise in early years, but those who have not received the benefits associated with such knowledge can relax with the understanding that it is possible to play catch up.

Is it possible, however, to learn about investing by using books as a source of information? There are many that would argue that a book can be used to learn about almost any subject and it’s hard to ignore the fact that countless books have been published in this area. When examining titles and summaries, it soon becomes obvious that they cover numerous different topics.

So there is clearly a challenge here to work out where to begin. You know that you want to learn more about investing, but where exactly will you be making a start? Are you planning, for instance, to become a commodities trader? If so, it seems likely that you will be required to pick up some specialist knowledge.

As a starting point, however, it’s undoubtedly important that any budding investor should familiarise themselves with the basic terminology that surrounds finance and investments. Without that thorough grounding, it becomes incredibly difficult to make substantial progress.

Further reading will also prove impossible until you have real confidence in those basic concepts that are under discussion. Good investors haven’t reached the position that they are in via a few lucky decisions (with the possible exception of a few extreme cases). Rather, they have built up the necessary knowledge to enable themselves to make informed decisions. They have done so because there is a recognition that an increased level of knowledge puts them in a much better position. It allows them to take improved decisions on a consistent basis, offering that advantage over other investors.

That may sound like a rather competitive approach and you may feel that you’d rather help others out. It’s important to remember, however, that there is an almost inevitable level of competition to be faced. After all, a successful investor will usually be one who spots opportunities within markets that have been missed by the majority. They are constantly seeking to take advantage of the mistakes of others, looking to build their own positions. On a daily basis, the situation is not quite as extreme as that may sound, but you do need to remember that your own success will rely heavily on an ability to outdo others who are looking to make significant gains.

How do you react when investments go badly?

Before you invest any of your hard-earned (or easily won, for the lottery winners amongst you!) cash on the stock market, there is one thing you should know.

There are no guarantees with the stock market. Even if you are investing in low or medium risk shares, that are expected to make a small but steady profit, you can still end up making a loss; or even losing your entire investment.

Before investing in the stock market, you should be aware that you can lose your whole investment sum, or perhaps even just break even, ending up with the same money that you started with.

Check out stock brokers and the companies that you are going to be investing in, to make sure that everything is legal, above-board and proper. Spending a few pounds on having a lawyer check out a contract will seem like a very worthwhile expense compared to losing all your savings.

However, all this advice is for before you invest. What should you do if you have invested and it has all gone wrong? First of all, check your overall finances and take steps to ensure that you can meet all your immediate expenses. Hopefully, this step will not be necessary as you should never, as the saying goes, have all your eggs in one basket.

Do not allow your one bad experience to embitter you against the stock market. Rather, learn from the experience and choose a wide range of stocks and shares instead for your next foray into the market. If you chose your ill-fated stocks personally, perhaps bow to the greater experience and knowledge of your broker in the matter of choosing the stocks and shares to include.

Whenever you do get your fingers burned in the stock market, make sure that you stay up-to-date with the financial news and be aware of all the clauses and exclusions in your paperwork. If the stocks you invested have failed due to fraud, for example, you may be able to put a claim in when the case comes to court. You may not get all your money back, but getting some of your funds back will ease the sting somewhat!

When making investments do not be dazzled by the possible returns. If any deal seems too good to be true it probably is! Be very wary of conmen, offering great returns on secretive deals.

If someone wants your money honestly, they may indeed want to keep it quiet and hush-hush, but they owe you, their investor, a full and honest disclosure of how your investment will be spent, how quickly they will start making a profit and how quickly you will get your money (plus interest) back again. The same applies to the stock market – if you cannot see or understand how they will make the enormous fortune they are promising it is unlikely to be a good deal for you!

To summarise, if you have lost some money on the stock market you should get straight back in the saddle again. Choose your stocks carefully, giving your broker’s advice a fair hearing, and only invest as much as you can afford to lose – think of the stock market as an enormous casino, where you are having a bet! With that in mind, you are unlikely to go far wrong!