Introduction to Investing for beginners

Before we get going with investing for beginners in earnest, a gentle suggestion… relax. The field of
investing is a large one, and there’s virtually an infinite amount of things to learn about investments.
The best, most successful investors will tell you that they are continually learning and continually
honing and expanding their skills at making money in the financial markets.

You can’t learn everything there is to know about investing, or even just investing for beginners, in
one day, but fortunately, you don’t need to do that in order to begin a career as a successful,
profitable investor.

One of the most glaring holes in our educational system is the lack of even basic education in the
areas of personal finance and investing. One of the most successful traders in history once remarked,
“If I’d only been taught in high school what I later managed to learn on my own about investing, I
likely could have retired wealthy by age 35.”

Perhaps that’s a somewhat “optimistic-in-hindsight” estimate of investing success, but there’s no

doubt that anyone can potentially reap massive financial benefits from simply taking the time to
learn the basics about investing as early as possible in life.

So be thankful if you’re reading this guide at age 16, but don’t be discouraged if you’re already well
past high school age or even middle age. It’s not too late to begin building a fortune through
investing, and the sooner you start, the sooner you’ll move well beyond investing for beginners and
achieve your financial dreams.

There are two truths we’d like to stress to you at this point: One is the fact that taking the time to
acquire even a very rudimentary knowledge of investing, whether at sixteen or sixty, will put you well
ahead of your peers in terms of financial literacy, and ultimately, in terms of financial success.

The second truth comes from one of the richest commodity futures traders. This wise, older man
confided an important “secret” about investing and wealth – “You can make a lot more money a lot
faster by sending your money to work for you every day, rather than just sending yourself to work
every day.”

And that’s all investing is: Putting your money to work for you making more money.

To jumpstart your investing, check out our free finance classes online!

Basic Types of Investing

This is the building block of investing for beginners. There’s an endless list of specific investments
you can make, but nearly all investments fall into one or the other of a handful of categories
commonly referred to as “asset classes.” An asset class is made up of investments with similar
characteristics that are also usually governed by the same set of financial regulations.
Asset Classes
The asset classes that most people are familiar with are as follows:

1) Equities/Stocks
2) Fixed Income investments/Bonds
3) Cash or cash equivalents, such as money market funds

There are several other asset classes you may wish to explore investing in at some point, which
including the following:

1) Commodities and futures, such as oil or gold

2) Alternative investments, which include real estate, foreign exchange (forex), and collectibles
3) Sustainable, Responsible and Impactful investments (SRI) with a primary focus on beneficial
social or environmental effects

NOTE: Generally speaking, alternative investments tend to be less liquid than more traditional asset
classes. Stocks, for example, are an extremely liquid asset, whereas a private equity investment may
require tying up your investment capital for a minimum period of five to seven years.

To jumpstart your investing, check out our free finance classes online!

Equity Investing
Equity investing, the buying and selling of stocks in publicly traded companies, is what most people
probably think of when they hear the word “investing” and is a popular investment for beginners.

Publicly traded companies offer investors an equity interest in the company through the purchase of
stock shares. For example, if shares of Advent Wireless (AWI) are trading at $1.28 per share, then you
can buy 100 shares for $128.00.

By selling shares, companies are able to raise capital to help them grow or expand.

Stock investors may buy stocks to profit from increases in a stock’s price; sell stocks to profit from a
decrease in the stock’s price; buy or sell options on stocks or stock indexes. Stock investors may also
seek to profit from receiving stock dividends. Dividends can be looked at sort of like earning interest
or a per-share bonus from stocks you own. Dividend.com is an excellent website for researching and
comparing stocks that pay dividends.

Stocks are traded on exchanges such as the Vancouver Stock Exchange (VSE) or the New York Stock
Exchange (NYSE). Exchanges regulate and facilitate the trading of stocks.

The most important factor that determines a stock price is, of course, how well the company is
performing. Other factors that impact stock prices include how well the overall industry the company
is part of is performing, the performance of competitors, economic conditions, and government
actions.

Stock investors are usually guided in their investment decisions primarily by either technical or
fundamental analysis. (For more on technical and fundamental analysis, see the section on “Principles
of Investing – Technical and Fundamental Analysis”)

There is a wealth of freely available information online for stock traders at websites such
as Morningstar.com, Yahoo Finance, and Zack’s Finance.

In addition to this investing for beginner’s guide, check out our online finance courses.

Fixed Income Investing for Beginners

Fixed income investing refers to investments in debt securities that offer investors fixed-rate interest
payments over a specified time frame – the life of the debt security. Debt securities are most
commonly referred to simply as “bonds.” The bond market is one of the largest markets worldwide,
thanks in part to the massive amount of debt being carried by most governments.

When you purchase a bond, you are providing financing for a company or a government, and in
return, you receive a specified interest rate, known as the “coupon rate.” Interest on bonds is typically
paid either semi-annually or annually until you receive the bond’s full principal amount back on the
bond’s specified maturity date.

The coupon rate is the yield offered on the bond at the time it is issued. As interest rates fluctuate up
or down over the life of a bond, the value of the bond, and its actual “yield to maturity” change.
Coupon rates do not change over the life of a bond, but changing interest rates do affect the bond’s
value and yield. As interest rates rise, bond prices fall; conversely, as interest rates fall, bond prices
rise.

For investors who hold bonds to maturity, fluctuating yield to maturity rates during the life of the
bond have no practical impact on their investment return. The current yield to maturity rate only
comes into play if you are buying or selling a bond in the secondary market sometime prior to its
maturity date.

The primary appeal of fixed income securities is their relatively low risk. If you’re buying bonds issued
by a major country such as the United Kingdom, making the specified return is virtually guaranteed.

Zero-Coupon Bonds
Some bonds are issued as “zero-coupon bonds.” Rather than offering regular interest payments,
zero-coupon bonds are instead sold at a significant discount from the bond’s face value. Investors
make a return by purchasing the bond for less than face value and then redeeming the bond at
maturity for full face value.
(For example, a zero-coupon bond with a face value of $5,000 might sell for $4,500. The investor
pays $4,500 to buy the bond, and then at maturity sells, or redeems, the bond at the face value of
$5,000, thus making a $500, or 10%, return on their investment).

Bond Sellers – Governments and Corporations

Bonds are sold by national, state, and municipal governments. Municipal bonds are very popular
because many municipal bonds earn interest tax-free.

In addition to governments, corporations also issue bonds to obtain financing. Corporate bonds
frequently pay higher interest rates than similar government bonds, but they also carry more risk.
Corporate bonds are also typically more volatile than government bonds because their value can be
affected by the perceived value of the corporate issuer.

Fixed income investments may appeal to investors planning retirement who have large amounts of
investment capital available during their working years. Such investors can purchase a large amount
of bonds, collect interest payments while they are working, and then around the time of their
retirement, the bonds mature and return the principal (face value) to the investor.