We all want to build wealth and retire comfortable. And most of us know that investing is the clear best way to build wealth over time, yet most Americans don’t own stocks. Part of the reason for that, of course, is economic inequality, but there are also those who steer clear of the stock market and other financial markets — including bond markets, cryptocurrency markets, and more — because they don’t fully understand how risk and reward work in these markets. Here’s what you need to know about going for big profits and playing it safe in modern markets.
Investing: stocks, bonds, and assets
An investment is anything that you buy in the hopes of creating wealth, usually through the growing value of the investment vehicle. Stocks are shares in companies that reflect the underlying value of those companies, as determined by the free market. Bonds are a debt vehicle. They’re essential shares of a company’s loan debt. Then there are other assets, which can be as diverse as your home and your stash of Bitcoin.
Profit and risk: two related things
All investments have risks, but those risks can vary significantly. A “blue-chip” stock in an enormous company is likely to hold its value, which makes it low-risk. On the other hand, you could speculate— a term for high-risk investing—on an unproven company or new commodity.
Even your investment in your home has risk, of course, but, generally speaking, you shouldn’t think of your home purchase as a get-rich-quick scheme. Home ownership builds safe and steady wealth when done right, you’ll take out a mortgage, explain experts in mortgage loans in Louisiana, and you’ll pay that instead of rent. The result will be a powerful and (ideally) very safe new asset—your home.
So why speculate? Why not always play it safe, as you do with core assets like your home? The answer is simple: you expose yourself to risk in order to make big bucks. In the world of investments, risk and reward tend to go hand in hand. When you invest in a big, safe company, that company is unlikely to fail — but it’s also not likely to double or triple in size anytime soon. When you invest in a new cryptocurrency, on the other hand, you could see big rises — or big drops, of course — in its value.
Going for big profits
If you want to make the most money investing, you have to take big risks. That’s what many day traders do. A day trader is someone who spends their work day trading stocks, bonds, and other investment vehicles. They frequently take more aggressive positions than casual investors do. Of course, day traders are in the thick of things. They tend to be well-versed in the latest investing strategies and the latest financial news.
If this sounds like something you may be interested in, you should start by reading up on financial news and investment blogs. Check some books out of your library, talk to a financial advisor, or another finance pro, and then open a brokerage account with a trusted company. You may also want a cryptocurrency wallet. In today’s financial world, Bitcoin day trading is a popular and often lucrative path for new and experienced day traders alike. Again, remember to read up on your investments. You’ll want to fully understand cryptocurrency and be familiar with the blockchain before you dive in. Balance your portfolio between Bitcoin and other often higher-risk and higher-reward cryptocurrencies, and balance your entire investment portfolio across all financial markets.
Balancing a portfolio and managing risk
Balance is key in managing risk as an investor. Whether you’re a day trader or a casual investor, you’re going to want to look at your asset allocation and balance risk and reward. Traditionally, experts advise younger investors to expose themselves to more risk and older investors to start thinking more about safety and security. You can and should work out your own personal balance with the help of a professional or plenty of independent research.