A guide to personal investing
Do your homework and research investments before you invest any of your hard earned money. There are many different investments that are legitimate but there are also many scams. There are so many different types of investments available to you. Just by being aware of the different personal investment options, you will be able to choose which investments to research more thoroughly. To help get you started, here are three types of investments:
1.Common stock:
Basically, common stock is part ownership in a company. Stock is often times referred to as shares, securities or equity. When you own stock in a company, you are entitled to a portion of the company's profits, along with any voting rights attached to the stock. The more shares you own in a company means the larger the portion of the company and it's profits you own. If the company declares bankruptcy, the common shareholders will not receive money until the creditors, bondholders and preferred shareholders are paid. No long term investment provides better returns at a reasonable risk than common stock. The risks typically depend on the company. Your stock is only as good as the company in which you invest in. You investment will be less risky when you purchase stock in a well-established and profitable company. In North America there are over 11,000 public companies to choose from. Using a brokerage is the most common method for buying stocks. There is always the possibility of the stock you invest in will decline in value and you may lose your entire principal. As with any investment, research before you invest.
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2. American depository receipt (ADR):
An American depository receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADR's were introduced in 1927 in response to the difficulty of buying shares from other countries, many times because of the different prices and currency values. Just like regular stocks, ADR's are bought and sold on U.S. stock markets and issued in the U.S. by a bank or brokerage. Most ADR's are priced between $10 to $100 per share. ADR's save investors money by reducing administration costs and avoiding duty on each transaction. ADR's are a great way individual investors can buy shares in a foreign company and capitalize on growth potential outside of North America. There is no minimum investment for the majority of ADR's, but keep in mind many brokerages require clients to have at least $500 to open an account. You may find it difficult to thoroughly research foreign companies because of language barriers and a lack of standards. Even though it may take you more time and effort to research, it is the only way to make an informed decision you will not later regret.
3. Collectibles:
A collectible is any physical asset that increases in value over time because it is rare or it is something desired by many people. Collectibles can take a long time to increase in value and there is no guarantee of their value will increase. However, most collectibles increase in value along with inflation. The price of a collectible can reach it's peak quickly sometimes, mainly for fads such as Beanie Babies and Pokemon cards. Antiques and other items can take several decades before appreciating in value. Unlike other investments, collectibles offer no income and because of the many uncertainties do not count on any collectible for your retirement.
Make an informed decision before investing, no matter what. Thoroughly research the investment, even if you have heard that it is great from others. Don't rely just on what you hear, find out for yourself. This is your hard earned money, invest it wisely.
