Rules in Basic Investing

Basic Investing

Basic rule number one – Is to always know what kind of income you are working for.

1. Earned Income: Income generally derived from a job of some form of labour. In most common form a paycheck. It is also the highest taxed income.
2. Portfolio Income: income generally derived from paper asset such as stocks, bonds, mutual funds, etc. Portfolio income is by far the most popular form of investment income, simply because paper asset are so much easier to manage and maintain than any other others.
3. Passive income: income generally derived from patents of license agreements. Yet approximately 80% of the time, passive income is from real estate.

Basic rule number two – is to convert earned income into portfolio income or passive income as efficiently as possible. Risk is always a part of investing, as it is with real life. People who are too negative and avoid risk back themselves out of the most opportunities because of their negativity and fear of risk.

Basic rule number three – is to keep your earned income secure by purchasing a security you HOPE to convert your earned income into passive income or portfolio income.

A security can be an asset or liabilities. When it is earning security is called an asset when it is not earning it is called liabilities.

Money is only a medium of exchange. In reality, money by it self has very little value. So as soon as you have money, you want to exchange it for something of value. The irony is that for many people who cling desperately to money, the money they spend for thing of very little value.. and some time turn their cash into trash.

The plan

1. to be secure
2. to be comfortable
3. to be rich

If you want to be rich you must invest first in something more valuable than money, This are time and education. These are more important than money.

Most people were saying “I don’t want to make a mistake” In the world of academic, people who made mistakes were considered stupid. In rich people’s world, mistake, risk and failure as an integral part of human development. So instead of avoiding risk and mistake, learn to manage risk and mistakes. A mistake is a simple lesson with emotion attached to it.