Understanding the most important investment concepts

It's always good to have at least a basic foundation of fundamental investment knowledge, whether you're a newbie to investing or working with a professional financial advisor. The reason is simple: you are likely to be more comfortable investing your money if you understand the jargon and the basics of investing. By combining the basics with what you want to get out of your investment strategy, you will have the ability to make financial decisions yourself with more confidence and will also be more engaged and interactive with your financial advisor.

Here are some basic principles that you should be able to understand and apply when looking to potentially invest your money or evaluate an investment opportunity. You will find that the most important points related to Millat Investments are quite logical and only require good common sense. The first step is to make the decision to start investing. If you've never invested your money, you probably don't feel comfortable making investment decisions or market moves because you have little or no experience. It is always difficult to find a place to start. Even if you find a trusted financial advisor, it is worth taking the time to educate yourself so that you can participate in the process of investing your money and to be able to ask good questions. The more you understand the reasons behind the advice you receive, the more comfortable you will become with the direction you have chosen.

Don't be intimidated by financial jargon

If you turn on the television on any financial network, don't worry if you can't understand financial professionals right away. Much of what they say can be reduced to simple financial concepts. Be sure to ask your financial advisor the questions that concern you so that you feel more comfortable investing.

IRA accounts are containers for holding investments, they are not investments themselves

The first area of confusion that most new investors get confused with is around their retirement vehicles and the plans they may have. If an investor has an individual retirement account (IRA), 401 (k) plan from work, or any other retirement plan at work, you must understand the differences between all the accounts you have and the actual investments you have within those accounts. Your IRA or 401 (k) is just a container that houses your investments and that comes with some tax advantages.

Understand stocks and bonds

Almost all portfolios contain these types of asset classes. If you buy shares in a company, you are buying a portion of the company's earnings. You become a shareholder and owner of the company at the same time. This simply means that you have capital in the business and the future of the business, ready to go up and down with the ups and downs of the business. If the company is doing well, its shares will do well and increase in value. If the business does not do well or fails, it may lose value on your investment.

If you buy bonds, you become a creditor of the company. You are simply lending money to the business. Therefore, you do not become a shareholder or owner of the company / bond issuer. If the business fails, you will lose the amount of your loan to the business. However, the risk of losing your investment to the bondholder is less than the risk to the owners / shareholders. The reasoning behind this is that to stay in business and have access to funds to finance future expansion or growth, the business must have a good credit rating. Additionally, the law protects a company's bondholders over their shareholders if the company goes bankrupt.

Stocks are considered equity investments because they give the investor a stake in the equity of the company, while bonds are called fixed income investments or debt instruments. A mutual fund, for example, can invest in any number or combination of stocks and bonds.