Newbie Lessons - Demystifying Investing

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Let’s talk about investing. Everybody thinks about it as a difficult thing to master, but why?

Mostly because people presume that it's hard, that it’s time-consuming and that you need a lot of money to begin.

Let’s demystify investing. It's not rocket science. Indeed, it’s very easy and it’s ruled by four simple math principles:

Add, subtract, multiply and divide. It's really that easy!

As you will see, all the seemingly scary numbers and figures relate to these basic principles.

Let's see an example

To see how a company’s core business is performing, we are going to subtract all the company’s expenses from the money the company is making from the sale of its products and services (a.k.a. Revenue). The result is the Company’s Profit.

We may encounter division and multiplication but you will see how easy it is to translate it if you know what to look for.

You don’t have to feel overwhelmed if you see a financial statement full of numbers. 

Relax, take it one step at a time, and understanding will come quite naturally.

Investing is full of jargon. Once you understand the basic concepts in plain English, you will see that it is not a big deal.

We want to explain everything in simple and clear language.

Let's first deal with the perception that investing is time-consuming.

Investing should be an important decision in everybody’s life. Investigation is an important part of the process, so you will have to invest time looking for good companies.

The time researching and putting all of your thoughts together is very important. This, in the end, will make all the difference.

Too many people spend more time reading up on their next TV series than in researching their investments or even getting a mortgage.

So, I won't lie to you, you will spend time doing research... 

Creating this new habit is one of the keys to success in investing.

 
Pablo de Miguel