The economic principle I examined was how people (usually) respond to incentives in predictable ways. There are many situations where this economic principle can be applied to the real world. For instance, while studying investing in the real world I found many examples of this principle. An example of this principle is how people keep coming back after making big gains in the investing world. By studying what people usually do when investing, I came across patterns that showed and proved this data that when people get big returns from their previous investing, they are incentivized and they come back for more investing, whether it is bigger or smaller than what they had previously done.
If you want to know how to invest in really anything to maximize your wealth, you need to know these three essential keys. By coming in with a plan on what, how, and when you are going to invest in, knowing what different types of investments there are, and learning how to play the market for profit, you will be able to maximize your wealth the easiest.
First, I researched on how to create an investment plan, and what exactly that means to have one. This is probably the most crucial step to maximizing profit in the investing “game”. This is what will make or break your investments and if you come in with a good plan you can almost guarantee profits. So, what exactly is an investment plan, this is something that you make to say exactly what you want to buy, when/at what price you want to buy it, and for how long you want to keep it/or till what price. By having all these parts complete in an investment plan, you will be well organized and will know exactly what you are doing. If you are missing one of these parts, or just don’t have a plan at all, you are going to not know what to do when certain things happen, and this is going to result in you probably losing that investment. This is the most important part of investing and without this, you really just should not invest.
Second, I researched on all the different types of investments that there are. I found out that there are around 4 main ones that people use, with about 10 different types in total. Some of them range from actually trading yourself, to having others manage and trade for you. You also have to decide on whether you want to buy and sell stocks to make a profit, or if you are okay with investing alternative ways like bonds, or CD’s. By coming into the investment knowing exactly what you want to do, you aren’t going to second guess yourself, and you can really count on your investment. Alternatively, if you do not know what you want, and you invest in the wrong thing, you will probably end up losing your money. This is where it all goes back to creating a plan. Knowing what you are going to invest in is the second most important part of investing you should know.
Third, I researched on how to play the market to maximize your wealth. This really ranges from learning how to read graphs the right way, to figuring out the best times to buy and sell, to following news that relates to the market, or investment of your choice. Really investing is all about learning and acting on you new learning. By being able to figure out what is going on with the graphs, you can “predict” what is going on and when it is going to happen. I left predict in quotation marks because you really never know what is going to happen, but from watching recent patterns, you can sort of figure it out. By figuring out the best time to buy or sell, you really will be maximizing your profits allowing you to maximize wealth. Following news on your investments is one part that I never thought would be too essential, but in reality it is extremely important and can tell you things that are going to happen before they do.
