Why am I doing this?
Most of us are probably active on this subreddit, because they want to increase their financial education in some way or the other.
So do I! I want to improve my financial education by learning at least one new financial term every week.
For me the best way to learn about a new topic is through these steps: researching, explaining and discussing.
I'll explain a financial term and give some of my own thoughts about it. You may have a different opinion on the definition I chose or think about that topic in another way.
And that's where I hope, the discussion kicks in.
But now.. Let's start with this weeks financial term: Investing
The first things I think about, when I hear the words investing or investment are money, Wall Street, and stocks. However, ‘investing’ can be considered in a much broader sense (e.g. invest time in educating yourself).
Generally, investing is understood as the committing of resources into some endeavor or thing in the expectation of a positive return.
Examples
A non-financial way of investing would be investing your time (resource) to read some books about finance (thing) in order to improve your financial education (positive return).
Financial investments look like this: Commit money (resource) to a business, project, real estate, stock, … (endeavor or thing) in order to get interest earnings, assets or financial profits in some other way (positive return).
What do you think about…?
The thing about investing is, that you only have the expectation of a positive return, not the guarantee.. This is where risk comes into play. You certainly want to minimize risk (or at least calculate with potential risks) so the odds are better, that a positive return really occurs. I have the following hypothesis:
Before investing money you should always invest time first.
Because you want to minimize risk and have high expectations of high returns, investing money into something you have absolutely no knowledge about is pure gambling. Knowledge and in this context financial education is crucial for being successful with your investments. But in order to gain knowledge you first need to invest time.
What do you think about my hypothesis? Feel free to ask questions, comment on my thoughts and give your honest feedback. If you are interested in learning and discussing more financial terms together, let me know. Finally.. thank you for taking your time, reading this and sharing your thoughts with us!
Submitted February 28, 2019 at 05:02AM by AMillionPI https://ift.tt/2tKdqW0
