People can
invest in their own business, such as a contract
cleaning or a car service. If the business
does well, the value of the person’s original investment
goes up. But individuals can
also invest in other people’s businesses. They can do this through the
stock market. That is how many millionaires have
made their fortunes.
People who invest in the stock market buy
stocks
and
shares
entitling them to ownership of a
small part of the company they have chosen to invest in. If the value of
the shares goes up, the people who own those shares make money. Millions
of people are investing in stocks and shares in the USA, UK, Europe and
Asia.
Professional
investors can show that the
stock market seems to go up most of the time. That does not mean that the
stock market will not
go down
next year. The shares people buy today may
be worth less
tomorrow.
It is possible for people who do not have a lot of money to invest a small
amount in the stock market each month. In fact, this can prove a
reasonable way to invest. The
value of the shares can grow
over time.
Look at the following example: If Monica and Roberto invest $100 a month
every month for 40 years, they will invest a total of $48,000. If they put
the money in a fund invested in the stock market, there is a good chance,
based on historical performance, that they will receive an 8% return or
interest on their annual investment. At the end of 40 years, their
outlay of $48,000 will - on this
growth model
- reach an accumulated total value of $351,428 assuming
all profits
are reinvested in the fund.
People invest in the stock market through stock broker firms or financial
management companies, such as Charles Schwab and Merrill Lynch. It is easy
in most countries to buy shares of companies on the stock market
over the phone
or on the World Wide Web through financial management companies
like these.
These companies can
advise
small investors
on how to put their money to work. They may suggest that
the investor buys stocks. They may suggest
mutual funds. Mutual funds
are great for small investors because the individual’s money is
managed
by professionals who have detailed knowledge of the stock market and how
companies are
performing at any given time.
There is one lesson about investing that everyone must understand.
Everyone invests
at their own risk. If someone invests in companies that
do not go up in value, they can lose some or all of their invested money.
Each person
is sole responsible for his or
her own investment
choices. If a person invests
well, their investments will go up more often than they go down.
However, do remember to get
independent advice before making any serious investment
decisions.
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