The most important rule of investment is so simple, it’s easy to be taken lightly: You decide what will happen with your money. What it can do for you is up to you.

What to do with it

The moment you receive money, you have to use it. Whether you can’t let go of it, need to keep it close by, or can easily trust others to borrow it, you always have something to gain or lose. Here are the main choices.

Spend It

You can buy things with it (always the crowd favorite).

Stash It At Home

If you stash money at home, it’s available any time and you won’t lose it. But it’s a sure way to lose money because inflation will slowly erode its buying power. Your job is to find ways to fight against that.

Bank It

Banks want to borrow your money. By opening account, you lend it to them until you need it. In return, you can have checks for quick access to your money and earn interest from a savings account or similar investment.

Lend It

You can lend money by buying bonds (where the bond issuer repays lenders like you with interest). Government entities and companies borrow money for many reasons, such as improvements and research and development.

Investing your money should be about investing for a better life – for you or someone you care about.

Buy Publicly Owned Companies

You can become a part owner of a company by buying shares of its stock. If the company does well, you might participate in the success. If it does poorly, you may lose money, just as any company owner would.

Pay The Pros To Do It for You

Mutual funds are professional money managers for the masses. You decide what you want your money to do, then select a fund that aims for that objective. The profits and losses are yours, minus the fees.

You can buy a home or other real estate. You gain or lose according to how the property value fluctuates.

Gamble

You can roll the dice, buy lottery tickets, or play any game of chance and hope to make a profit – or risk losing it all. you could also invest in stocks and bonds without knowing what you’re doing.

Some basic principles

To invest means to use something in a way that will give you more value in the future. Deciding to invest means thinking of your time and money as a tool for achieving some worthwhile goals.

What are securities?

Securities are tools created for people to either share ownership or to lend money. They’re packaged according to strict government standards. When a company wants the public to share its ownership (going public), it’s required by law to package shares of stock as a security, file the package for government approval, and offer it to the public according very specific rules. When a company or government body wants to borrow money from the public, it must follow other, similar procedures.

Money works for you

If you owned a company, you would have employees working for you. Think of your money that way. The more money you send out in the world to work for you, the more money you can accumulate to produce wealth for you.

Investing choices

As an investor, your job is  to find opportunities to use (invest) your money. For example, you can:

• Be a lender or an owner;
• Keep the money close to you or let others use it for longer periods with more control. The longer you let someone use your money, the more you should be paid for that use. The more risk someone puts your money under, the more they should be willing to pay you for trusting them with those risks.

Buy low, Sell high

You usually can’t tell when an investment is high-priced and ready for a fall, or vice versa. But you can keep in mind that:

• Professionals often recognize a high price and sell a security before the general public reaches the same conclusion, leaving average investors as the ones to carry the losses;
• The higher the price goes, the more people may be become fearful and begin to sell;
• People tend to look at past performance instead of future prospects, and therefore, often end up buying high and selling low;
• It’s more difficult for something to rise than for it to fall, which means that prices are generally capable of falling much faster than they rise.
• Guard your money from losses

It’s a lot easier to lose money than it is to make more. For example, percentages are misleading. If you lose 50% of your money it will take a 100% gain to get back to where you started, not a 50% gain.

Investing is a matter of deciding how much trust or faith you have in the promises being made to you.

A definition of Saving

Over a lifetime, the wealthy often become wealthy because they follow these two simple rules. First, they save, meaning that they spend less than they earn. Second, they use credit wisely and don’t become overextended in debt.