{"id":40366,"date":"2021-07-03T08:56:56","date_gmt":"2021-07-03T12:56:56","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=40366"},"modified":"2021-07-04T18:22:43","modified_gmt":"2021-07-04T22:22:43","slug":"understand-investing","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/understand-investing\/","title":{"rendered":"Understand Investing: The Key to Financial Security"},"content":{"rendered":"\n

Do you know what passive income and socially responsible investing<\/a> are? What about dividends? Would you like to understand investing better?<\/p>\n\n\n\n

If you want to make sure you have enough money for the rest of your life, you’ll benefit from understanding investing terminology and basic principles. Knowing the ins and outs of risk tolerance, investment fees, and the like will give you\u2014and your money\u2014an advantage.<\/p>\n\n\n\n

Read on to understand investing better.<\/p>\n\n\n\n\n\n\n\n

Understand Investing to Maximize Your Financial Security<\/h2>\n\n\n\n

Imagine having enough money coming into your life through passive income that paid employment is optional. It\u2019s not about getting huge amounts of money but about knowing how to invest so that you have enough money for the remainder of your life.<\/p>\n\n\n\n

The more you understand investing terminology and principles, the more you’ll have a handle on smart investing.<\/p>\n\n\n\n

Investing Terminology<\/h3>\n\n\n\n

Passive Income<\/h4>\n\n\n\n

Passive income is another way of saying \u201cinvestment income\u201d\u2014money you don\u2019t work to earn.<\/p>\n\n\n\n

You can earn passive income<\/a> from investments in five different ways (and you can see that passive income has investing terminology of its own):<\/p>\n\n\n\n

  1. Interest.<\/strong> If you invest capital in certificates of deposit, bonds, or savings accounts, the money accrues interest over time. <\/li>
  2. Rent.<\/strong> This is any payment you receive from renting out estate property that you own. It is the money you received, minus any associated expenses, like taxes or repairs.<\/li>
  3. Dividends.<\/strong> You\u2019ll get paid dividends, or a slice of profits, if you\u2019re the owner of a private company, or if you invest in ETFs, stocks, or mutual funds.<\/li>
  4. Royalties.<\/strong> If you own a patent, natural resources, or a franchise, you\u2019ll earn money through royalty payments when others use the property.<\/li>
  5. Capital gains.<\/strong> If you sell stock or real estate, you\u2019ll earn capital gains: earnings from the sale that exceed the money you invested when you purchased it.<\/li><\/ol>\n\n\n\n

    Risk Tolerance<\/h4>\n\n\n\n

    Risk tolerance is your willingness to make risky investments. It\u2019s a spectrum from not wanting to risk any capital to wanting to risk all of your capital in return for large gains.<\/p>\n\n\n\n

    Your willingness to make risky investments depends on many factors, which include:<\/p>\n\n\n\n