Investment is simple when you have a long term horizon. Through out the years, the indices is always going up. You can just see any chart from yahoo, msnmoney, google finance eg Dow Jones industries, S&P500, STI...
In long term stock tend to move higher, some of the reason are inflation, demand of goods goes up and indices will drop the non performing company and replace them (except for Jap)
The return from the market through out the years from 1950s to 2000s is about 8% to 12% per annum , a median of about 9% per annum.Which mean to say if you invest and hold for long term u will make money.
However what to invest become the next very important question...
Also the risk involve is the most important question that anyone need to know
U have to understd them before making decision.
In the market there is systematic risk and non systematic risk...
Systematic risk are things we cant control eg 9-11, war, natural disaster etc
non systematic risk are things we can do, like diversification of portfolio, which mean invest in different sectors and try to ensure that stocks invested within the portfolio have little correlation.
There are a few more risk too, country specific, industry specific and value risk.
Country specific
Eg like Greece, like US, or when in the asian financial crisis like Thailand. This risk is specific to the country.
Industry specific
Eg when H1N1 strike, the airline industry is badly hit and the pharmaceutic industry goes higher. this risk is specific to the industry.
Value
In any investment, there is no guarantee, mean no capital protection at all. individual have to bear the risk.
Investment is not for everyone, but i urge everyone to invest for retirement and hedge inflation. Cos working for your whole life is not the solution. Unless u are drawing 100k or much more per annum, you may lead a good life when retire. Invest is to make your money work hard for u. you work hard at work, but you let your money slack. Does that make sense??
Nxt post will talk more about how to invest
