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How to be an Investor

Becoming an investor will allow one to earn money without having to work for it. Successful investments will result in profits, dividends or interest incomes. With this, the next question will then be: how to be an investor.

Anyone interested in investing should first know what investing options are open to him or her, how these investments can be achieved and the risks involved.

If anyone would ask how one can make money without working, he would probably get the answer: be an investor. It is true that once the venture, business or company you invest in profits and become successful, you eventually earn through dividends, capital withdrawals or proceeds from a sale. With this possibility, the next question in anyone’s mind would be how to become an investor.

Research How You can be an Investor

There are many ways in which you can become an investor. You can invest in certificates of deposits (CDs), stocks, bonds, 401K plans, or marketable securities like commercial paper or treasury bills. CDs and other marketable securities are usually available from banks, 401K plans from your employer/company you work with, while stocks and bonds can be available from brokerage firms. There are two ways in which you can invest in these mentioned securities, either you do the investing yourself or allow a manager to handle your investment portfolio.

The success on each of these ways of investing depends on different factors. The return on CDs for instance will depend on interest rates while the return on stocks will depend on a company’s capacity to give out dividends, its determined rate or the overall stock market performance. Investments also differ on the length of time on which you can invest on them: there are long term and short term investments. Long term investments usually involve bigger returns however they involve greater risks. Short term investments like CDs on the other hand, are low risk investments with lower returns.

Know the Risks of Becoming an Investor

Knowing the difference between types of investments will generally give you an idea of the risks involved. Return on investments that depend for instance on interest rates have the risk of being low when rates are low. Long term investments on the other hand, which depend on company and market performance, will have a risk of not having any return at all. So before becoming an investor, it is important that you know that your investment may have a chance of not having any return at all.

There is one way however, in which you can minimize the risks of your investments. Experts and fund managers would advice you not to put all your investments in one basket or in one form of investment only. By diversifying or combining many types of investments like stocks, bonds and CDs, you may actually obtain a portfolio which will still earn no matter what the state the financial market is in.

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