I asked my friend Stephanie yesterday if she and her husband were investing. She looked at me like a deer in the headlights and said “I don’t think so, we just have a TSP”. I smiled at her and said “Well, that is a tax-preferred way to invest. Congratulations, you are an investor”. She laughed and asked what the heck I was talking about.
So what is investing?
I realized many people have this misunderstanding. Let me make it clear and simple:
Investing is the act of getting your money to grow for a future date to beat inflation. The most popular ways to do this is by buying shares of mutual funds, ETFs, stocks, bonds or real estate.
What are all those accounts about?
It is very common to start investing in tax beneficial retirement accounts such as a military TSP, company 401K, non-profits 403b, or a personal IRA. These account names have everything to do with the IRS and taxes and nothing to do with the investments inside of them.
If you have any “retirement accounts”, you are already an investor! Congratulations! In this site, I will be going over all these investments and account types by reviewing books and sharing videos that cover these topics in a clear manner.
A video that makes it simple
But to start you off, here is a short and direct video about what investing is
Are you still confused?
I get that, there are thousands of ways to invest! There is also what people call “investing” but is really speculating (aka gambling). There is the idea that you are only investing if you are buying and selling stocks.
What investing is NOT
If you watched the video it becomes clear what investing isn’t.
- Investing is not watching the stock market each day, looking for every little up or down.
- Investing is not buying and selling stocks every few days, weeks or months.
- Investing is not trying to “buy low and sell high”.
- Investing is not active.
What investing IS
- Investing is buying and holding for the long term.
- Investing is giving your money to a company to help them grow, in return, you gain returns on the lent money. If you want to understand better how your money is used and how it all works watch This video crash course in Finance and Investing
- Investing is having a TSP, IRA, 401K, etc.
- Investing is having mutual funds.
- Investing is having bonds.
So are you an investor?
Do you realize that maybe you too are an investor and didn’t really see yourself as one? Have you ever thought “oh I don’t invest, I use mutual funds” or “we have no investments” but you have a stack of bonds that your grandparents gave you as a kid; those are all investments!