Even if you are employed and have never heard of the stock market. You are already investing. Investing is a broad term that covers many different aspects. In laymen’s terms, to invest is to allocate resources, usually money, towards something for hopes of a profit.
You, as an employee, are already investing.
The resource you currently have is time. You are trading time for money at your 9-5, or in other words, you are investing time into something with hopes for it to produce a profit. This is a great way to start your investing journey! After all, it takes money to make money.
And before you hate on your day job, remember it takes some time for your side hustle to produce enough income to become financially free. Before you start investing in the stock market or real estate, ensure you are setting yourself up for success, and if you still reckon you are broke, read this article. Where it talks about making the best investment, you can. Possibly the only investment with zero risk and will likely increase your pay 10x. (hint: it’s investing in yourself)
Pause (If you haven’t read that article, go read it, and come back when you are done. This can wait…)
What exactly are those guru’s going on about “investing into the stock market?”
What is the stock market?
The stock market is simply a place for people to buy a portion of a company. As the companies’ value grows, so the value of your share increases.
Your friend has a business. It’s currently doing quite well, but your friend needs more capital to scale the business and truly make a profit. You have great faith that he will do well and make millions. “He is pretty good at these things,” you think to yourself. If only there was a way you could share in his riches while enabling him to succeed.
You can’t become a business partner because you are tied down doing your own thing, the only thing you have is a bit of spare cash, but luckily for you, this is exactly what your friend needs. So, you approach your friend and explain that you want to give him some money now, which he can use to make even more money.
Similar to a bank, you want to give your friend money now and have more money later. Although this business can make millions, how much interest should you charge, that will be fair? “I wish I could just say something like the more money you make, the more money I want to make,” you think to yourself while scratching your head.
“Eureka!” you exclaim. “I’ve got it.” You decide not to give nor loan money to your friend; you simply purchase part of his business. Although your friend’s business is currently valued at R100 000. And he requires a further R100 000 to make his millions.
Your friend decides to sell 50% of his company for R100 000 and splits this 50% into 10 shares. Making one share costs R10 000 and is worth 5% of his company. You and a couple of people decide to purchase all his shares. Your friend takes this capital and makes his R200 000 business worth R1 000 000 a couple of years later.
This is the idea behind the stock market. Your friend’s business’s value increased by 500%, and therefore so did your investment into his business.
While the stock market is unlikely to have such significant returns on your investments. The basic premise is beating inflation and using your money to make more money.
“This sounds amazing!” You think to yourself, “where do I learn more?!”
This blog is an excellent resource for learning about investing and personal finance! Check out some of the other posts. This one is a great place to start that specifically talks about starting to invest as a beginner.
Make sure to speak to a registered financial advisor before making investment decisions.