Investment: the secret sauce to a wealthier future

Investment is a term we’ve all heard before, and an action we’ve all been encouraged to do at some point. Whether it was investment in knowledge, time, or money, this golden term and simple transaction allows you to reap enormous benefits you can’t fathom!

Speaking from a financial perspective, we’re here to give you an insight into investment and how it helps pave the way towards a wealthier future and continuous financial health. So, are you ready to hear it?

What exactly is investment?

In the grand scheme of things, investment refers to devoting time, energy, and effort in the pursuit of a certain thing that is considered to yield great benefits. When it comes to financial investment, this term denotes placing your money into assets and securities — such as stocks, bonds, mutual funds, etc. — with the aim of growing that money overtime to buy the object of your desire or keep yourself financially wealthy and healthy. It also plays a key role in helping you fight inflation, because it allows you to be prepared in case the price of goods suddenly increases by helping you mitigate the risks.

Different types of investment

As we’ve previously discussed, investment comes in various forms, and if we start listing them now, we won’t be able to stop. So, to make it easier for you, here are 4 financial instruments you can invest in.

ETFs: An exchange-traded fund (ETF) represents an investment fund that is traded on stock exchanges. ETFs typically include a bundle of financial securities and assets such as stocks, bonds, currencies… They are one of the most attractive investments because of their low costs and tradability, where money is typically made by monitoring price fluctuations. Assuming you bought an ETF for 1,000 JOD and their market price increases to 1,500 JOD. If you decide now’s the right time to sell your ETF, you will cover the money you’ve invested and make 500 JOD profit on top of it.

Bonds: This financial transaction is when an investor lends money to a borrower, for a certain period of time, in exchange for interest payments. Once the bond reaches a certain date, the borrower will then have to return the money back to the lender. There are two ways you can benefit from this investment, either by collecting the interest income or generating capital gain by selling the bond at a higher price than it was originally bought.

Stocks: Stocks perhaps is the most common term on our list and the one financial asset you’re most familiar with. It refers to the ownership of a fraction of a corporation via a share. For example, you might decide to invest 500 JOD in a company like Apple. Once you’ve acquired your stock, or share, there are two ways you can earn money. Either via dividends, which are profits distributed to investors and shareholders, or by selling the stock when stock prices increase. So, if after 6 months your share is worth 700 JOD, and you’re no longer interested in owning a stock in Apple, then you can directly sell it and pocket the extra 200 JOD.

Mutual Funds: In several ways, mutual funds are similar to ETFs, but the main difference is that they are not traded on stock exchanges. This type of investment represents a tool where several investors come together to purchase instruments and securities. And because it’s a fund, it encompasses various financial instruments, such as stocks and bonds, to generate return. There are typically three ways to earn money from mutual funds. Through:

• Income: money earned over the year from interest on bonds and dividends on stocks
• Capital gains: as explained prior, it’s when you sell your securities at a higher price than when you originally purchased them

The secret to effective investment

Most people assume you need a large sum of money to start investing. We’re sorry to burst your bubble, but this isn’t a fact. In truth, you can invest with as little as 50 JOD, but the secret to effective investment is having a strategy and putting your foot in the door.

Shoot your shot and observe how it plays out. Diversify when needed, and don’t necessarily stick to one financial asset. And most importantly, know which asset suits you best. Is it a stock or a bond? An ETF or a mutual fund?

Investments can be tricky, and you won’t learn the ins and outs in a day or two, but a great way to keep yourself financially healthy and plan for a wealthier future is by taking this leap of faith and trying your hand at it. You might be surprised with the outcome you’ll get!

If you’re interested in know more about how to start investing and grow your wealth, get in touch with us here.