How to make money investing

Let us count the ways

This is a very basic post about the nature of investing, suitable for beginners. More seasoned readers may want to skip this one!

There are in fact only two ways to make money investing.

One is to buy or own something that produces money. This could be owning a house and renting it out, buying a stock and receiving dividends, or writing a book and getting royalties. Lending money (or buying bonds) is in this category.

The other way is to buy something and hope that the price goes us, so you can eventually sell it for a profit. This could be buying Bitcoin, a stock, or an NFT.

These are the only ways to make money investing. Some investments are the first type, some are the second, and some are a combination of the two (a dividend-paying stock would be an example of something that combined both).

One thing you can do when considering investments is to think about what type the investment is, and what your purpose for investing is. That can help you figure out if the investment is a good fit for your situation.

Of course there are other factors too. Do you understand the invesment? Will it take a lot of time? How risky is it? (remember that there are different types of risk).

Investing isn’t magic, and it shouldn’t be particularly difficult. For any given investment, you should be able to identify how it is going to make money, and why.

For example, if you are thinking about buying gold, you might consider the limited supply of gold, the industrial applications of it, and the fact that people tend to treat it as a store of value. On the other hand, you might focus on the fact that the gold supply is artificially constrained, that it has been very volatile in the past, and that it doesn’t inherently produce any value.

You would realise that gold is a type 2 investment (you only make money if the price goes up and you sell). After thinking about all this, you can then decide whether or not gold would be an appropriate investment for you at this time.

We can do the same with any investment. The great thing about investing is that we are never forced to invest. If you can’t find something you want to buy right now, you can just wait until a more attractive option comes along.

Never buy things you don’t fully understand, or that you can’t explain in a simple way to others.

One way to get a better understanding is to ask questions in the forum ^-^