February 21, 2014
This semester I’m taking a finance class and the one thing that we talk about more then anything is investing. My professor loves to invest, and he seems very proud and certain about which companies he has put his money in to. But a better question isn’t, what company should I invest in but how should I invest my money? You have a few different options, between bonds, single stocks, or mutual funds (there are more but these are the main ones). The logic behind the mutual fund, which is what I use, makes more sense. With the single stock what it is your doing is risking your money with one company, so what happens if that said company goes down or the stock loses value? What a mutual fund is is a bundle of companies put together, so let’s say one company does poorly that quarter, you have the rest of the companies to take the impact for you. The best analogy I’ve seen, you have a pencil, which represents a company, and that pencil can be broken quite easily, but if you were to have 10 pencils put together you would have a much tougher time trying to break those pencils. On to the most important factor when dealing with investing…time. Time is the most important item in the whole recipe, that is why it’s so much smarter and easier to start at an early age, because eventually time will be doing all the work for you. I’m very thankful that my eyes were opened early, I’m 22, and that I began reading some good books on financing. I’ll get to some great books and authors on my next post so make sure you come back.