If you’re currently in a good place, financially speaking, you are probably starting to think about investing to raise your fortune. If you’re still not financially stable – well, believe it or not, investing is still a good idea.
Even though it may sound a bit intimidating, investing is the best way to use your money. It can improve your financial situation, and provide you with security when you retire. Still, it’s a serious matter that you should consider carefully. Here are some words of wisdom to guide you in this endeavor.
1. Start ASAP
The sooner you start investing, the more money you’ll have by the time you retire. If you don’t want to miss out on the beauty of compound interest, you should start investing as soon as you start earning. To illustrate: if you start investing $300 a month when you are 20, by the time you’re 60 you’ll have more than $1 million. On the other hand, if you invest the same amount of money a month starting when you’re 30 years old, at 60 you’ll have about $450,000 – not bad, but a far cry from a million, don’t you think?
2. Understand your finances and plan well
The very first thing to consider when thinking about investing in your financial situation. Look at it objectively, and try to come up with a solid plan. Consider your monthly income versus your expenditure. Can you cut down on some expenses? Don’t put your last dollar into your investment fund – it can be a tricky business, and not all of your investments will pay off.
Instead, put a sum of money on the side every month, so you’ll have an emergency fund for rainy days. In summary, your plan needs to account for your income, expenses, savings, and investments, among other things.
3. Think outside the box
If you’ve got the impression that the only way to invest is to buy shares or stocks or have a go at day trading, you’re sorely mistaken. There are many other ways to invest your money, with equally good results. For one thing, you can consider peer-to-peer lending. You can collect a nice sum in interest, by lending money to those who need it.
Another possibility is investing in commodities, like gold, silver, and diamonds. In the worst-case scenario, they don’t lose value. At best, their value can double over 10 years. Investing in real estate is typically not particularly lucrative, but it is one of the safest bets out there, and so is investing in consumer staples. Make sure you consider all your options and choose the best ones.
4. Mix it up
Now you know that there is more than one type of investment available, here’s the next word of wisdom – never put all your eggs in one basket. If you diversify your portfolio, you’re making sure that you’re covered – in case one investment offers poor returns, the other will be there to neutralize the loss, and so on.
There are three main categories of an asset – stocks, bonds, and cash. Up until now, they have never risen or fallen at the same time. That means that, if you have a hand in all three of them, you’ll probably be safe even in unforeseen circumstances.
5. Follow the idea
If you have a good business idea, follow through with it. If you don’t have the funding, but you are convinced that the moment is right, do what you can to make it happen. Possibilities are endless: you can ask a bank for a loan, you can find a partner who’d like to invest in your brilliant idea, or you can even find unsecured personal loans online. If your idea is good, you shouldn’t let the opportunity slip through your fingers because of money alone.
However, do not blindly follow the idea while disregarding everything else. Consult in your target field. Find out if there is an objective need for your goods or services in the market. Find out how saturated the market is. Consider how big the initial investment should be, and have a backup plan in place, just in case things don’t go your way. Follow a good idea, but be smart about it.
6. Invest in yourself
Investing in your education and skills is always money well spent. The most obvious way to improve your financial situation through education is to put some time and money into getting a higher degree, which will grant you a higher salary. However, there are less conventional routes you can take in this regard.
For example, learning about the stock market can improve your investing abilities, and learning a craft or skill that’s sought after can prove to be a valuable asset in earning extra income. Doing a course on finances or business can help you set up your entrepreneurship, and even regular daily activities – such as doing crosswords, sudoku, or morning yoga sessions – can help keep your mind sharp, which can help you make better decisions. Anything you invest in yourself will pay off sooner or later.
7. Be smart and cautious
Finally, be aware that, if an offer sounds too good to be true, it’s probably because it is. If you know that a company is doing well and will probably be prosperous in the future, chances are that scam artists know the same – and will use the knowledge to trick you. Make a point of always double and triple-checking your every investment before you pour your money into it. Once your capital is gone, you’ll probably not get it back, so be careful and keep in mind that it’s better to be safe than sorry.
Investing is the best way to increase your fortune and prepare for a comfortable retirement. It doesn’t have to be a scary idea and you shouldn’t feel like you’re not up to it or like it’s not your cup of tea. Be cautious and prepared, do your homework, and you’ll be just fine – and you’ll be even better in twenty years or so!