You’ve been on the entrepreneurial path for so long now that you’ve forgotten more than most people ever know about what it takes to run a successful business. At this time, you’ve reached a point where your efforts have brought you more than enough surplus income to invest. Your next challenge is to learn how to use your money to make money.
What Should You Do With Your “Surplus”
When it comes to investing, most people think of the stock market. Here you can buy a share of a publicly traded company. The stock market, as you know, is essential for the stability of a free market economy because it allows companies to get their hands on capital to grow their business. In exchange for your money, you get a slice of a company and can even claim to have a nominal ownership.
The seduction of the stock market is that you can, in theory, watch a small amount of investment money grow over time into a huge sum. What’s more, there is the possibility that you can become wealthy without starting your own business or working your way up in a high-paying career.
Despite the nominal title of ownership, investing in the stock market is a completely different process from building your own business. You have no control over how the companies you invest in perform. Yet, despite this absence of the power to influence outcomes, it’s theoretically possible to buy enough shares to earn much more than you could when you traded your time for money.
Volatility and Strategy
While people do make money in the stock market, they are the few who have figured out how to ride market volatility and figured out a reliable way to win more than they lose. Market volatility is complex because there are hundreds of reasons why a stock can be bullish or bearish.
Figuring out the right strategy is also open to debate. The preponderance of “systems” adds a level of complexity that is hard to sort through. Despite the enormous amount of information available on how to make money in the stock market, no single strategy has yet been discovered. In fact, much of the information is highly contradictory. For instance, despite the obvious success of buying a stock and holding on to it for decades like Ben Graham, Warren Buffett, and John Templeton–a strategy known as “value investing”– common brokerage advice is to diversify, because you never know if your stock is the next Enron and you could lose everything.
Alternative Ways of Investing
If you’re not sure if you want to invest in the stock market but still want to invest, you might be interested in looking into Binary Options or Index Mutual Funds.
Binary Options
Instead of investing directly in a stock you take a position on whether a stock price will rise or fall. Binary numbers, 0s and 1s, are akin to saying “yes” and “no.” They are on and off signals. Similarly, binary investments ask you to take a “yes” or “no” position. Will the stock go up or will it go down, yes or no?
This simple structure makes binary options easier to trade than regular stocks or option trading.
Once you select a binary option, you can only hold on to it until it expires, at which time you will receive a prearranged payment if you made the right decision. If the option settles above a price you specified, you get paid, and if it settles below the price you specified, you don’t get paid.
Basically, you estimate whether the price will go up or down, either making gain on the upside or experiencing a loss on the downside. Your target price is called a strike and if you call it right you are “in the money.”
The best way to learn is by reading a blog like 24option that gives you an excellent idea about what is happening with different trading assets. You should also take a few classes, watch some videos, and read some books to completely familiarize yourself with the best strategies to deploy to figure out how to make the most accurate decisions. It’s also advisable to focus, sticking to a particular market and getting to know how to interpret the binary option prices in it.
Index Mutual Funds
Another idea to look into if you’re not feeling comfortable with regular stock trading because of market volatility and the difficulty in picking a winning approach is index mutual funds which use IRAs. The big advantage is that you do not have to spend much of your time nurturing your portfolio.
An index is a collection of highly successful stocks. When you buy an IMF, you get a slice of each of these stocks. As the market grows, your portfolio does as well. You can even forget all about strategic trading and just check your portfolio occasionally. In other words, it’s mainly a hands-off approach. Over the course of decades, your money will most likely grow because big markets tend to grow rather than fall, and they do this many times over. Your basic participation is to make regular contributions to grow your stake.
Takeaway
Investing is a different way of making money than you’re used to as an entrepreneur, and you can’t use your familiar skillsets to build your fortune. You have to think about the business of being an investor in a completely new way than the business of being an entrepreneur.