A great way for people to get rich is to invest in the stock market. It doesn’t matter whether you invest in stocks or bonds or even something as complicated as options. Some banks offer GICs which are tied to the performance of the stock market – these are great for beginner investors who are willing to pay a little bit of money to avoid risk.
Other people will invest in mutual funds or ETFs. Both of these funds are collections of stocks and bonds which are then sliced up into pieces and sold to investors. The benefit of these funds is that you can invest in a diversified portfolio without having to buy a lot of different stocks and bonds. This is the cheapest option for a diversified portfolio, even though the fund managers will charge a small fee.
Forex Trading
Perhaps the most profitable and exciting way to invest in the stock market is to participate in forex trading. ETX forex provides a great explanation of what forex trading is – basically, you’re betting on exchange rates.
Analysing exchange rates is super difficult, which is what makes forex trading so fun. Exchange rates change base on a wide array of factors which include the health of the home and target economies, the trade deficit between the two and the market sentiment.
I’m sure forex trading sounds abstract to you, so here’s an example. Country A uses buttons for money and Country B uses dollars. In the beginning, one button was equal to one dollar. Soon, Country B’s workers began producing items that Country A wanted really badly. Country A traded in lots and lots of buttons for dollars because, well, how else would they buy products in Country B? Soon though, fewer people were willing to trade their dollars for buttons. Country A didn’t make anything that Country B wanted and buttons were gathering uselessly all over the country. Slowly, the price for a dollar increased to two buttons, then to five buttons.
A person in Country B who could predict this problem would happen, would engage in forex trading by buying up a lot of dollars when they only cost one button and then waiting until the price rose to five buttons before selling them for a 500% profit.
Obviously forex trading is much more complicated than that. However, trading currencies is challenging, fun and can be immensely profitable.