Investing is a method of putting money aside so that you can have it work for you while you are busy with other things. If done correctly, you will reap the full benefits of your investments in the future, which should prove beneficial for you in the long term.
The number one reason why people do not invest is fear; fear of getting started, fear of doing it the incorrect way, and what ends up happening is we lose a lot of money by waiting to invest. When it comes to investing, the moment of investment is more important than the amount of money invested.
What Is Compound Interest?
Compound interest is calculated by multiplying the initial amount by one and increasing the annual interest rate to the number of compound interest periods.…this means that the money you put aside will be exponentially larger the longer you leave it to work. For example, if you invest $100 k at 25, when you reach the age of 65, and it is time to retire, that same amount might be up to one million dollars.
It is important that you do not take the money, put it into your bank, and think that it will grow. There is a special account in which you will need to deposit your money; this depends on your bank.
Choose an Investment.
Two basics things to invest in are stocks and bonds. A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the stock owner to a proportion of the corporation’s assets and profits equal to how much stock they own. Bonds are units of corporate debt issued by companies and securitized as tradeable assets.
Stocks are more lucrative but also more unsteady, and on the flip side, you have a less lucrative bond but a more stable and consistent income over time.
What Are Index Or Mutual Funds?
You are wondering what index funds or mutual funds are – these are groups of individual stocks. So if you are thinking about investing and you are afraid of failing, you may invest in these groups of stocks, and it will minimize the risk of failing.
How To Know Where To Invest?
There are two ways to start investing, you can ‘DIY,’ or you can use a Robo-advisor. Using the DIY methods means that you are confident enough to manage your investment by yourself, but this might not be the best option for you if investing is intimidating and confusing to you. When you DIY your investment, you do your own market research, but you do not have to pay a fee.
If you do not feel confident enough and you want to start investing anyway, you might want to consider the second option; a Robo-advisor. What these Robo-advisors do is take a small fee to invest for you. So it is pretty simple; it will ask you a bunch of questions such as, how much do you want to invest or what is your risk tolerance… and they are going to make decisions based on these answers. So, it is a great way to start investing if you are feeling intimidated.
Investing is as easy as climbing stairs, except that the first step is five feet high. You have to choose whether you will start or not; it all depends on you.
Even if you are just starting out and have a modest amount of money, you may invest. It’s more involved than just picking the appropriate investment (a challenging task in and of itself), and you must be conscious of the limitations you encounter as a beginning investor. Let us know in the comments what you think of investing in…