When you think "investor", you probably think of an old white guy in a suit. At least that's the first image that pops into my mind. We have been conditioned to think of investment as an activity reserved for the elite. Investors are people who own large fractions of multi-national companies, who buy Presidential elections, who fly everywhere by private jet. Right?
Well actually, any decision that you make with your time or money is an investment. You can decide either to let your money slip away, or use it to build further wealth. It's as simple as that. For this reason, every person is an investor. But it's up to you whether you want to become an effective investor or not.
To understand how to become a good investor, let's think about some helpful words from an old white guy in a suit. Warren Buffett says that the key to investment is this: "Never lose money". This axiomatic statement is so simple that it might seem ludicrous. But let's think about it for a moment. You can immediately see how you could build significant wealth if you just never lost any money. What's more, I think it's pretty simple to see ways that the average person can implement this strategy. Here are a few.
- Eliminate Debt. Debt is expensive. It's a loan that you haven't paid back. But you're being charged for that privilege. The money you borrowed on credit at one time never belonged to you. And now that it's spent, the thing you bought doesn't really belong to you either. Only when the debt is paid and you stop paying interest will you be free and clear. Because debt mounts at fast rates (10-30% is not uncommon), debt builds more debt fast. In this way, millions of people are hemorrhaging money, often amounting to sums they will never see in their lifetime. Stop losing money in this case by working to cancel your debt.
- Stop Losing Your Savings' Value. You need to be earning interest on your savings. Otherwise, inflation will strip your cash of its value, year after year. Investors use a variety of means to beat inflation, like CDs and Bonds investment. But this will only preserve the value of your money, not increase it. In order to do that you'll have to…
- Invest Wisely. There are many ways to invest. Some have the long term in mind, such as stocks and mutual funds. Others are geared toward large growth in the short term, such as Forex trading. Short term investments are based on real world events, which influence sudden changes in associated asset values. Forex gives investors the opportunity to trade on assumed value changes among these assets, based on real world insights. For example, dailyforex.com has suggested: "Despite Greece's vote in agreement of debt terms, it appears that investors have little faith that the most recent fix will be a permanent one." Based on information like this, a savvy investor might be able to make small investments based on an unsteady Euro. Forex is great because most brokers allow new investors to "play" at investment while they learn, without risking any real money. Through practice, you can learn how to "not lose money" often enough to see fast gains out of Forex trading platforms.
