How To Invest: Personal Finances

by humagaia

How to invest our personal finances to maximise returns, comes with personal investment planning. This is #1 in an investing for beginners tutorial series: investments for dummies.

Failing to learn how to invest will seriously damage your wealth.
We must understand how to put our personal finances to best use, and undertake a personal investment strategy to maximise our return on investment.
Personal investment is now essential for your well-being.
Changing times make everyone an investor.
Investing for medium-term profit, and long-term retirement income, are crucial.

How To Invest: Investing For Dummies

Investing For Beginners: Introduction

But why do you have to "learn" about investing at all?

Obviously you want to make more money.

But there is a much more pressing reason: the economic climate makes you an investor whether you like it or not.

Piggy bank - personal finances made simple
Piggy bank - personal finances made s...

Over recent years it has become much more important to learn about investing and investments.

Historically, from a personal finances point of view, our lives were much simpler.

We could get by - and maybe even prosper - just by understanding the basics of personal financial planning.

Our personal finances could be accommodated in a piggy bank, our wallet or purse, sometimes a bank account. Maybe we had a mortgage, and some insurance. But that was just about it.

Personal Finance Plan

Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over ...

'Personal Finance' Books

Further reading

We had the money in our pocket, our bank account, or savings & loan account (UK building society account).

Perhaps we had a few investments, an endowment policy, life insurance backed annuities - such sophistication!

No complicated decisions!

Prudence was the name of the game.

Just live within your means and safeguard your savings.

But then, very quickly, a financial services revolution took place.

Financial Services Revolution

The Financial Services Revolution: Understanding the Chan...
Only $55.00

Inflationary pressures of the 1970's and early 1980's eroded the wealth of many. This was especially the case for those individuals on fixed incomes from savings and pensions. Perversely, and simultaneously, fortunes were made by those fortunate enough to be in beneficial investments, such as property and precious metals.

A more profound change followed.

With the advent of increased wealth, and the accompanying availability of disposable income, came consumerism and the need to plan for the future: for the family well-being and for a happy and prosperous retirement. With the increases in longevity, the latter has become even more necessary, yet harder to achieve. These changes in wealth and need required servicing.

The Financial Services industry was born.

Financial Services Wiki

Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions, banks, credit card companies, insurance companies, consumer ...

Money, and all the places we could invest, were opened up to aggressive advertising, marketed, and sold as packaged products.

The "Big Bang" in financial services had arrived.

Financial Services Big Bang Wiki

The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures, including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the ...

Overnight even simple everyday decisions became bewildering.

How does one choose between the confusing array of accounts offered by banks and building societies?

And how can you be sure that your money is safe?

What about all the other "products"?

Innumerable offers were available for mortgages, pension plans, mutual fund (UK unit trust), exchange traded fund (ETF - UK investment trust), UK business enterprise schemes, and UK personal equity plans, now ISA's (individual savings account's).

Where is it safe to put our money?
Where is it safe to put our money?

And in addition: schemes offering products for time-shares, tax planning, school fees, inheritance tax, and offshore investment accounts and insurance.

What about the Stock Markets?

NY Stock Exchange
New York Stock Exchange
New York Stock Exchange

Was this a good place to invest?

Well the booming Eighties turned into the Nervous Nineties.

More recent downturns have shaken confidence further.

You may well wonder whether these events have altered the Stock Markets forever.

Well the answer to that is that they have not.

Did program trading, insider trading, the collapse of banks, or the buccaneering dealings of financiers, stack the odds against individual investors?

Well, no they did not.

What is a Stock Market?

A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock ...

List of Stock Exchanges

This is a list of active stock exchanges. Those futures exchanges that also offer trading in securities besides trading in futures contracts are listed both here and the list of futures exchanges.

In fact, they only led to much more stringent investor protection, although this is still far from perfect. Governments have tried, at various times, to curtail the excesses and regulate the markets. This, until recently, has been undertaken by the Government of individual countries, but the banking crisis of the last decade means that a more global approach is necessary.

Financial Regulation Wiki

Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by ...

The boom of the Russian (and Russian satellite countries) economy, and the Chinese (and other Asian countries) market economies, alongside the creation of the ever-expanding European Union hold uncertainties for the economy and monetary system.

It has had an impact on the world economy.

Publications about Economy

How an Economy Grows and Why It Crashes

How an Economy Grows and Why it Crashes uses illustration, humor, and accessible storytelling to explain complex topics of economic growth and monetary systems. In it, ...

Wiley  / $19.95  $5.32

View on Amazon

Aftershock: The Next Economy and America's Future (Vintage)

Updated for paperback publication, Aftershock is a brilliant reading of the causes of our current economic crisis, with a plan for dealing with its challenging aftermath. When ...

Vintage  / $14.95  $4.76

View on Amazon

Basic Economics 4th Ed: A Common Sense Guide to the Economy

The fourth edition of Basic Economics is both expanded and updated. A new chapter on the history of economics itself has been added, and the implications of that history ...

Basic Books  / $39.95  $29.16

View on Amazon

World Economy Wiki

The world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national ...

The US economy has historically had an effect on us all. When that is booming we prosper: when it is in the doldrums the world economies have followed suit.

US Economy Wiki

:Throughout this article, the unqualified term "dollar" and the $ symbol refer to the US dollar. The economy of the United States is the world's largest national economy. Its nominal GDP was estimated to be over $15 trillion ...

But that is changing: emerging economies are no longer as reliant on the US economy. In fact it is the US economy that is becoming more reliant on emerging markets to sustain the illusion of wealth.

What these events show is that the pace of change is always accelerating.

The result is more risk for the unwary and uninformed, but increased opportunity for the knowledgeable. The upside is that the internet arrived, and with it online investing, and the opportunity for everybody to become knowledgeable.

Online Investing Wiki

Investing online, or self-directed investing, has become the norm for individual investors and traders over the past decade with many, if not all brokers now offering online services with unique trading platforms.

'How to Invest' Books

Further reading

I say "opportunity" for you must take advantage of the information that is presented - that is if it has been made available!

In this series of articles the information you need to understand how to invest your personal finances will be laid bare in simple terms as an 'Investing for Beginners' tutorial program.

Next Investment Article

Successful investing for beginners guides you through the maze of jargon and hype. It explains the basics so you can move into investing your money with confidence.
Updated: 03/11/2012, humagaia
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