If you are a firm believer in saving your hard-earned money, then you will also agree that being aware of the fundamentals of investment is crucial. Especially now, when we live in the digital era, and we have plenty of online investment platforms flashing on the screens of our smartphones to select the best one. Safeguarding your surplus income is one of the significant concerns, but instead of depositing them for slow growth, why not invest them to multiply with incredible momentum? Before you try your hands at online investment, let us first zero down on a few basic investing principles.
Investments can be broadly classified into two categories: real and financial. Real investments involve purchasing physical assets such as land and gold, but financial investments involve buying paper securities like stocks and bonds. There are different factors on which these investments depend:
- Forms of security-Where and how they are purchased and sold, security is a legal document that mentions the benefits to be paid in the future under the specified terms and conditions agreed on by both parties.
- The investment process-This includes mainly the type of investment selected and the amount of security to be invested.
- Financial theory- The factors on which the return profit depends and the magnitude of risk involved.
To understand the functioning of share market, it is necessary to break down the types of securities which can be traded in these markets.
- Non-marketable securities-These types of securities are considered safe because of their liquidity, involve the personal details of the investors, and are held by recognized institutions. They cannot be traded further once purchased, for example, savings accounts and government savings bonds.
- Marketable securities-Such securities can be traded among investors in many ways, sometimes in a regulated and highly developed market, other times among individual investors with brokerage involvement. Investment in such securities can be made through online trading. They are further classified into four types depending on their maturity period and asset values.
- Money market securities have short maturity periods,
- Capital market securities have a long maturity period.
- Securities known as derivatives are those whose value is based on the value of an underlying asset or security.
- Indirect investments involve the purchase of shares listed by investment companies, where the motive of such companies is to pool funds and diversify their financial portfolio.
The trading business is simplified to a great extent because now, one can use an online trading platform and manage the entire transaction from the comfort of home with a suitable device and speedy internet connection. All financial products can be bought and sold online from a variety of options, using real-time money.
All you need is a fully functional share market app installed on your smartphone, enabling you to manage your entire financial portfolio anytime and anywhere you want without having to switch on your computer or laptop. If you are dreaming of retiring early, you must have a passive income source. It is only possible if you invest a portion of your current income into sustainable financial products that promise higher and stable returns.