Back in the 1980s, much was written about developing a passive income, one that would supplement whatever a wage earner was able to save after fulfilling their monthly obligations. Usually this ancillary cash took the form of investments, often in the form of reliable blue chip stocks and municipal bonds. Brazen, reckless, or daring investors opted for technology stocks, a concept which to Millennials who eat the latest tech for breakfast, seems very quaint. Today, however, professional salaries are not as lucrative as they once were leaving those in the workforce at all levels seeking other ways to make ends meet as well as to save for a comfortable future. In this article we explore how investing has changed over the last 50 years and for those willing to take the plunge, how to go about it.

Long before crowdfunding, issuing investment shares in exchange for money took hold in Europe back in the 12th century. In fact, most voyages to the New World had been underwritten all or in part by investors hoping for a percentage of whatever spoils the explorers had on board upon their return- assuming that they indeed returned. Such pacts were arranged by the voyage. Over time this evolved into exploration enterprises that issued stock for dividends on all proceeds from every voyage undertaken. Factor in non-competition clauses and improved boat building and navigation and investors had little to lose and so much to gain. Eventually even governments became investors. The rise of the British Empire in the 18th and 19th centuries not only expanded British colonies way beyond the sceptred isles’ shores, but also made the monarchy very, very, wealthy.

The Rise of American Investing

After the Revolutionary War two stock exchanges opened in America- in Philadelphia and New York. The NYSE, headquartered at 11 Wall Street in Lower Manhattan, coupled with the nation’s growth through railroads, urban and westward expansion, national resources, and immigration soon became the most powerful financial institution in the world. The NYSE retained its power until 1971 when what is now called FINRA (Financial Industry Regulatory Authority) created a different type of stock exchange, Nasdaq (National Association of Securities Dealers). To begin, Nasdaq does not have a physical address nor brokers. It is a computer network that executes trades completely electronically. Nasdaq’s benefits include faster and more efficient trading, a reduced bid-ask-spread, and its existence forced the complacent NYSE to up its game to retain its crown.

This background history is helpful, but how can those seeking to make money with minimal risk proceed? When it is time to invest, first determine what monetary amount you are comfortable with. Next do some online research and determine the best strategy for your needs. You can consult an investor, but most professionals prefer to work with experienced investors who are willing to invest sizeable amounts of money. There are many online brokerages who will work with newbies, but do your homework and, as with any business transaction, sign with a reputable agency. What to invest in? Most opt for tradable assets including stocks and bonds, each with a known, but fluctuating monetary value. Since each asset can gain or lose value, the goal for investors is to build a portfolio of diversified holdings comprised of these securities. Stocks can be defined as shares, or equity, held in a publicly-traded business. By comparison, bonds are a fixed-income loan made to a company or even to a government. Details regarding how stocks and bonds are issued/sold and how they ‘work’ is an online search every reader should make and be clear about before investing.

Don’t Jump in the Deep End

A basic overview before taking the plunge is to know the recent history of the stock and bond markets. Go back 25 years and understand that the stock market not only fluctuates, but historically, it can also lose 50% or more of its value. Due diligence must be applied to every transaction. One cannot simply invest and walk away, returning when any money earned is required for another purpose and cash out. Bonds, as stated above, are a loan with interest. While a safer investment as risk is not as great, the gains are not either.

If all this information has only instilled greater caution and hesitation, perhaps speaking with a certified financial advisor is a solid next step. Successful investing requires knowledge, timing, having short and long term goals, along with a thorough understanding of the process as well as the ‘what ifs’. The safest investments are those that are made with full knowledge of all the risks involved. Arm yourself with information, seek professional guidance if needed, and watch your money like a hawk. Forget any stories you may have read about getting rich quick by investing in the latest technology or throwing too much of your hard earned at a high risk stock, unless you can afford to lose all. Knowing when to ‘fold ‘em’ does not just pertain to poker! Pay attention, proceed with caution, diversify, and watch your financial future grow!