“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Ever wonder why this quote by Warren Buffett rings a forthright bell that delves into the superfluity of proficiency? Well, this is simply due to the fact that the many facets of investment apply to this quote.
For those without experience, investing may be a minefield as well as a fantastic chance to build wealth. Not without a doubt, it can also be overwhelming and perplexing; however, that shouldn’t ever be the case!
In this blog post, we will break down the concept of investing into its most basic components to help you understand it better. So, stay tuned!
What is Investing?
Investing is simply the act of putting money into a financial asset with the expectation of seeing a profit.
An investment on the other hand, is an asset or item that is purchased with the expectation that it will generate income or appreciate in value over time. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. Examples of investments include stocks, bonds, real estate, and art.
It is good to note that people opt to invest for a variety of reasons. Some people invest to increase their wealth, while others invest in order to generate income or preserve their capital. Above all, investing helps you achieve your financial goals irrespective of your reasons.
Investment Basics: Active Vs. Passive Investing
Before diving into the world of investing, it’s essential you have a clear picture of the different ways people invest, which could be either active or passive investing.
Active investing is a term used to qualify an investor who actively manages their portfolio by buying and selling assets based on their own research and analysis. This is achieved through the use of technical and fundamental analysis to make informed decisions.
Technical analysis examines previous market data by evaluating underlying elements such as a company’s financial history, management, and competitive environment, usually to discover trends and make future predictions. In the same sense, fundamental analysis identifies stocks that offer potential growth as well as the company’s competitors.
With this in mind, it’s reasonable to assume that active investors are often more aware and experienced in the industry, since they can swiftly discover and capitalise on market opportunities.
Passive investors tend to be more hands-off with their investment proceedings. This type of investing is generally considered to be less risky as it doesn’t require investors to make decisions about when to buy or sell.
Additionally, passive investing enables investors to entrust an expert investment manager or firm with their money, often to assist them in selecting the most lucrative investment vehicle to maximise their returns.
Which Type of Investment Does HavVest Offer?
HavVest is a company built with two fundamental phrases engraved in its core values: “Building wealth by revolutionising the world of investing” and “Saving for the future.”
These values are achieved through active investing, but with a plus. We have done our research and analysis, and we are offering you an investment and savings platform that transparently propels you to reach your investing and savings goals with much less stress – even as a beginner.
Why Investing Is Critical for Financial Stability
Investing is a great way to protect and grow wealth by harnessing the power of compound interest and capital appreciation. There are other substantial benefits to investing, but these ones particularly stand out:
- Investing is a smart way to protect your wealth in the event of an uncertain economic environment.
- Investing in low-cost, diversified investments can also help you minimise your risk and maximise your returns.
- Finally, investing can help you reach your retirement goals.
Diversifying Your Investments: Strategies to Investing
Asset allocation is a good way to diversify your investments. This entails putting together a portfolio of assets from several asset types. This helps to minimise risk by preventing you from having too much of your money concentrated on one investment.
Other ways investments are diversified are:
- Diversifying by sector: This requires investing in many sectors within the same asset class. For example, if you invest in equities, you may diversify among industries such as technology, healthcare, and consumer products. This might help you spread your risk and profit from diverse sectors at various phases of development.
- Diversifying geographically: This requires making investments across several nations and areas. Buying assets that are traded internationally, such as international mutual funds, ETFs (exchange-traded funds), and equities, is one way to do this.
The Power of Compound Interest: Building a Portfolio
Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”.
Many people may not fully comprehend this idea, maybe from the point of obliviousness but compound interest is a powerful concept that can help you build a successful investing portfolio.
At its core, compound interest simply means that the returns you earn on an investment is calculated not just on the initial amount invested, but also on the accumulated returns your investment (ROI) has brought so far. This means that as your investment grows, so does the ROI earned. Over time, this can create a snowball effect that can grow your portfolio exponentially.
One of the best ways to take advantage of compound interest is by investing in long-term assets such as stocks, bonds, commodities and real estate. These investments will provide steady returns over time and can create an augmented growth of magnitude if you’re able to reinvest the returns you earn.
To conclude this text, making sound investments come with an understanding of your goals and objectives. Above all, it is worth noting that we are always accessible to answer any questions you may have. Create an account with us at HavVest today to learn more about our investment and saving plans!