Welcome to Shrewd-Investment.com!
For those new to investing we have a wealth of articles, covering topics such as how to invest small amounts of money, and overviews of the different ways in which you can invest.
We also cover newer less well known investment methods such as how to buy cash flow notes.
Before you get stuck in though, be sure to find out…
What Makes a Solid Investment
European banks provided some of the earliest investments opportunities – some as far back as the Middle Ages. These early banks were little more than a merchant with a strong box who held gold for those lucky enough to own it. The merchant would loan the gold to other individuals who promised to pay it back with a premium.
When the gold and the premium were repaid, the merchant would share the profits with the gold owner. This was the gold owner’s “return on the investment”. However, where there are investments, there are also risks and, even worse, the danger of a market crash. This has been true as far back as the 16th century.
The first recorded market crash occurred in The Netherlands in the 1590s. Tulips from Turkey had been introduced to the Dutch in 1593 and the craze for the flowers soared to unbelievable heights. Frantic tulip purveyors, eager to cash in on the tulip phenomenon, began buying up tulip bulbs so fast that it caused prices to rise to extremely high levels, creating a market bubble.
A market bubble is when prices inflate so rapidly in the market place that they far outweigh the true value of the item.
At some point, the high price of tulip bulbs made many of the flower merchants decide to take their profits. So, they began to sell their bulbs to other investors – almost all at once. The price of tulip bulbs across the country tumbled.
Those who did not get out in time lost the fortunes that they had invested in the high priced flower – that was suddenly worth very little. It is ironic that the tulip is now the symbol of the Dutch, who historically – except for the time of the terrible tulip crash – were remarkable investors.
The most recent example of a market bubble and crash occurred in the 1990s, as the world was going Internet crazy. A person could start with a niche item to sell or a unique service to provide, create an Internet company out of thin air to market it and make a sudden fortune.
Online-based businesses, most with no tangible assets and only a short performance history began to soar in perceived value – virtually overnight. Soon investors were flocking to the “net” to put money into the next best Internet venture – and many, indeed, made a lot of money.
However, market savvy entrepreneurs began to sell their successful websites, only to go off and start new ones and repeat the process. Like the faded tulip industry 400 years earlier, the websites became so high priced that more and more website owners began selling, taking their profits and running.
Investors who had not gotten out in time began to panic and sell out as well and the perceived value of the virtual businesses plummeted, leaving some investors with nothing but worthless websites.
When investing it is important to know what you are investing in and what the investment is worth. Companies listed in the Fortune 500 are considered “blue chips.” A “blue chip” is usually considered a strong, stable investment; a company whose stock should be purchased for the long term – what’s known as a “buy and hold” – enabling the investor to see continued steady growth and reasonable profits each year.
These stocks will be more stable in the long run than the small start-ups that may or may not survive over time or even for a single month. That is because a “blue chip” company is a company with a strong financial base and a solid business plan– or may even be an industry leader.
If you know exactly what you came here for, please use the sitemap link on the right of the website to find the relevant article. Otherwise, feel free to browse through our collection – the featured articles section on the right hand side is a good place to start.