Today marks the beginning of a series I tag “Investing for Beginners.” Entrepreneurship and investing has always been a subject I am passionate about and I deem it fit to share this passion with you. Now if you are an investing novice or newbie? Then you will find this “investing for beginners” series very educating. Before I go into the basics of investing, I consider it wise to define investing. Now what is investing?
What is investing?
There are several definitions of the word “investing.” I looked up the word “investing” on Google and I came up with several definitions. Some of the definitions of investing are:
a) Investing is putting your money to work for you.
b) Investing is how you make your money grow or appreciate for long term financial goals.
c. Investing is the proactive use of your money to make more money.
If you look up the word in the Oxford dictionary, investing is defined as “the process of buying property, shares in a company, etc in the hope of making a profit.”
Most investing beginners see investing as the act of putting in money in a system for a return on investment. Some see investing as a process of putting your money to work while others see investing as the process of buying and selling stocks, real estate or other investment products.
But of all the definitions of investing; the one I find suitable and reasonable is the definition put down by Robert Kiyosaki in his book “Rich Dad's Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!.” Simply put:
“Investing is a process or financial plan of how to get from one financial level to another.” – Robert Kiyosaki
One true fact about the word investing is that it means different things to different people. An entrepreneur building a business is investing. An individual who buys stocks, real estate or mutual funds is investing. A man who raises a large family is investing; and an individual that attends seminars, workshop or even attend college is also investing. So in actual sense, investing is what you take it to be.
Why is investing important? Why you should Invest?
Investing has become increasingly important over the years, as the future of social security benefits becomes unknown. People want to insure their future and they know that if they are depending on Social Security benefits, and in some cases retirement plans; that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.
You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you’ve inherited money or realized some other type of windfall, and you need a way to make that money grow. Again, investing is the answer.
Why People Invest Money
Regardless of what you are investing in, or what you are investing with; people basically invest for three reasons. I once again thank Robert Kiyosaki; my personal finance expert for his insights on the subject of investing. Robert Kiyosaki made me understand that people invest for three reasons.
a) To be secure
b) To be comfortable
c) To be rich
The question now is: which are you investing for? Well, I think that’s a topic for another day. Now back to the issue on ground. Investing is also a way of attaining the things that you want, such as a new home, a college education for your children, or expensive ‘toys.’ Of course, your financial goals will determine what type of investing you do.
If you want or need to make a lot of money fast, you would be more interested in higher risk investing; which will give you a larger return in a shorter amount of time. If you are saving for something in the far off future such as retirement, you would want to make safer investments that grow over a longer period of time.
The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income; you will eventually want to retire.
You also cannot count on the social security system to do what you expect it to do. As we have seen with Enron, you also cannot necessarily depend on your company’s retirement plan either. So, again, investing is the key to insuring your own financial future, but you must make smart investments.
Written by Ajaero Tony Martins
