How does investing actually WORK?
Re: How does investing actually WORK?
Good advice! I guess I just feel really stupid when everyone here is discussing things or I'm reading an article posted on the site and have no idea what's going on. But yeah, just start out small and go from there!
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Sybil
Re: How does investing actually WORK?
To be honest, not everyone has the right character to be invested in the stock market. I knew a guy who sold his entire portfolio of 25 years at the low point during the Lehman crisis. If you are a person who panics when you see paper losses on your investments - I wouldn't recommend investing in stocks (despite the usual decent performance over longer time periods).
Re: How does investing actually WORK?
Nah, I've figured out enough to know that panic is NOT a good thing when it comes to investing!
Re: How does investing actually WORK?
It’s not stupid question at all, family and your surrounding will shape your perception and knowledge toward investment. By posting to this forum you try to find out, that’s good!
Anyway what was in your mind how to make money in investment before you join this forum?
Heard plenty panic stories like that.That's why is good to diversify your asset classes. So when one of asset at low point other asset still hold. Fluctuation is normal thing in investment so it is important not to panic to any price drop, since it will pay off in the long run.Sybil wrote: ↑Tue Jan 29, 2019 11:58 pm I knew a guy who sold his entire portfolio of 25 years at the low point during the Lehman crisis. If you are a person who panics when you see paper losses on your investments - I wouldn't recommend investing in stocks (despite the usual decent performance over longer time periods).
Work hard, invest hard! Re: How does investing actually WORK?
I was mostly just thinking about retirement. I'm a single mother, so I only have myself to rely on. Plus, my daughter is disabled, so I'm going to be taking care of her for a really long time and I'll need to make sure I have a decent enough income in my old age to do that.
Re: How does investing actually WORK?
Oh hey....how exactly do I find mutual funds on Rakuten anyway? I heard ETFs are better, maybe?
Are bonds OK to invest in?
Are bonds OK to invest in?
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RetireJapan
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Re: How does investing actually WORK?
Mutual funds are 「投資信託」 or 「投信」. Right now mutual funds are extremely competitive in Japan, and might be better than ETFs.
You can buy individual bonds or bond mutual funds.
I would recommend reading Millionaire Teacher or one of 竹川美奈子's books if you can read Japanese:
https://www.retirejapan.com/resources/books-english/
https://www.retirejapan.com/resources/books-japanese/
You can buy individual bonds or bond mutual funds.
I would recommend reading Millionaire Teacher or one of 竹川美奈子's books if you can read Japanese:
https://www.retirejapan.com/resources/books-english/
https://www.retirejapan.com/resources/books-japanese/
English teacher and writer. RetireJapan founder. Avid reader.
eMaxis Slim Shady
eMaxis Slim Shady
Re: How does investing actually WORK?
As far as investing goes, what specific questions do you have?
Sorry if this is too basic, but I hope it's not.
Investing can generally be broken in to two general areas. Lending and business ownership. Oh and this is technically passive investment.
Lending is pretty straight forward, you take your surplus income and lend it to other people/organizations and they agree to pay you interest. This includes investments like savings accounts and bonds. I think you get the idea, but a borrower comes in to a bank asks for a loan to start a restaurant and agrees to pay back the money plus interest. You deposit your money in to a savings account and the bank takes it and lends it out to borrowers. Bonds are the same thing only they usually come in fixed denominations, I'm American and a lot of US dollar based bonds are $1000 USD. Businesses issue bonds or get loans when they need money for expansion typically, but not always. The business plans to use the money to generate more profit which it uses to pay back the loan or bond. So the bank makes money and you make money. FYI, the banks love this since they don't need to use their own money to make money.
Business ownership is basically stocks. When you own stock you own a certain percentage of the company and are entitled to receive a vote on the direction of the business and its management. Notice, I didn't say anything about making money. There are two ways to make money with stock ownership. The first way is easy, if the company's management has a dividend policy, then they take a certain percentage of the profit the company makes and they distribute it to the shareholders.
The other way to make money with stocks is from buying and selling it. This is a little more complicated, but not much. You buy low and sell high. I'll use Amazon as an example. Amazon.com debuted on the stock market back in 1997 at $18/share. So 20+ years later how much is a share of Amazon stock? As of yesterday's market close, $1,718. So if you bought it then and sold it now, you would have made a lot of profit. Stocks generally go up over time so it's not bad bet. Historically, the US S&P500, it's a listing of the 500 largest US companies, averages 7-8% growth per year. At 7% you double your money roughly every 10 years, but that is the average case and specific timing can radically alter your returns. For example if you needed to retire during the market crash in 2008, you probably couldn't afford to do it and had to wait a few more years.
For that reason, most financial planners will advise when you're younger put money in to stocks to try to grow the value and as you get older and closer to retirement, start selling the stocks and buy bonds or even cash accounts (savings, money market etc...).
Bonds a fine to invest in, but just like stocks there are better ones and worse ones. There are bond rating agencies that will rate the quality of bond based on the issuing party. The highest rated bonds are AAA, and since they're safe they also have the lowest interest rates. The riskier the issuing party, the higher the interest rate to compensate the lenders. The main advantage with bonds over stocks is that in the event of a bankruptcy, bond holders are the first in line to collect. Stock holders are usually wiped out. Usually, not always, it depends on how the bankruptcy plan goes through the court. Just like stocks, bonds can be traded, but that's a long post. But if you plan to hold your bonds until maturity, the point at which they pay you back plus interest, then it's not as big of a deal, depending on your investment plan.
Oh and there is technically one more type of "investment" but I generally don't like it as much. Life insurance products. I'm not a fan, but some people do use it as an investment, a very expensive investment, but some people like it because it does provide a lot of certainty as long as the insurance company is solid.
Sorry if this is too basic, but I hope it's not.
Investing can generally be broken in to two general areas. Lending and business ownership. Oh and this is technically passive investment.
Lending is pretty straight forward, you take your surplus income and lend it to other people/organizations and they agree to pay you interest. This includes investments like savings accounts and bonds. I think you get the idea, but a borrower comes in to a bank asks for a loan to start a restaurant and agrees to pay back the money plus interest. You deposit your money in to a savings account and the bank takes it and lends it out to borrowers. Bonds are the same thing only they usually come in fixed denominations, I'm American and a lot of US dollar based bonds are $1000 USD. Businesses issue bonds or get loans when they need money for expansion typically, but not always. The business plans to use the money to generate more profit which it uses to pay back the loan or bond. So the bank makes money and you make money. FYI, the banks love this since they don't need to use their own money to make money.
Business ownership is basically stocks. When you own stock you own a certain percentage of the company and are entitled to receive a vote on the direction of the business and its management. Notice, I didn't say anything about making money. There are two ways to make money with stock ownership. The first way is easy, if the company's management has a dividend policy, then they take a certain percentage of the profit the company makes and they distribute it to the shareholders.
The other way to make money with stocks is from buying and selling it. This is a little more complicated, but not much. You buy low and sell high. I'll use Amazon as an example. Amazon.com debuted on the stock market back in 1997 at $18/share. So 20+ years later how much is a share of Amazon stock? As of yesterday's market close, $1,718. So if you bought it then and sold it now, you would have made a lot of profit. Stocks generally go up over time so it's not bad bet. Historically, the US S&P500, it's a listing of the 500 largest US companies, averages 7-8% growth per year. At 7% you double your money roughly every 10 years, but that is the average case and specific timing can radically alter your returns. For example if you needed to retire during the market crash in 2008, you probably couldn't afford to do it and had to wait a few more years.
For that reason, most financial planners will advise when you're younger put money in to stocks to try to grow the value and as you get older and closer to retirement, start selling the stocks and buy bonds or even cash accounts (savings, money market etc...).
Bonds a fine to invest in, but just like stocks there are better ones and worse ones. There are bond rating agencies that will rate the quality of bond based on the issuing party. The highest rated bonds are AAA, and since they're safe they also have the lowest interest rates. The riskier the issuing party, the higher the interest rate to compensate the lenders. The main advantage with bonds over stocks is that in the event of a bankruptcy, bond holders are the first in line to collect. Stock holders are usually wiped out. Usually, not always, it depends on how the bankruptcy plan goes through the court. Just like stocks, bonds can be traded, but that's a long post. But if you plan to hold your bonds until maturity, the point at which they pay you back plus interest, then it's not as big of a deal, depending on your investment plan.
Oh and there is technically one more type of "investment" but I generally don't like it as much. Life insurance products. I'm not a fan, but some people do use it as an investment, a very expensive investment, but some people like it because it does provide a lot of certainty as long as the insurance company is solid.
Re: How does investing actually WORK?
I think I'm starting to figure things out. I'm reading Millionaire Teacher now. I'd have to actually look at Japanese books to see if I could handle reading them or not, but Amazon doesnt have sample pages of those.
But then I have to figure out what all these things are in Japanese and not completely screw it up. That's one of my big worries...investing in the wrong thing because I missed something!
Just out of curiousity, zeo mentioned insurance products as invesments. What does that mean?
But then I have to figure out what all these things are in Japanese and not completely screw it up. That's one of my big worries...investing in the wrong thing because I missed something!
Just out of curiousity, zeo mentioned insurance products as invesments. What does that mean?
Re: How does investing actually WORK?
Zero mentioned not liking insurance products as investments and I would agree with that. Insurance companies are not very good at investments and the products they offer do not grow your wealth. Insurance is something we buy to avoid uncontrollable, catastrophic costs. It costs money but does not create wealth. Japan has one of the most over-insured markets in the world so you are surrounded by bad examples here. If your primary language is English you have a wealth of good information available in English on investing. It's actually more difficult to find good investing advice in Japanese and little reason to look for it.