As you enter adulthood and kickstart your career, you’ll eventually come to the realisation that no matter how many paychecks you’ve redirected to your savings account, that it’ll take you years before it turns into anything of weight. At the rate of the money you’re bringing back home, you may be paying off your house or car for years on end.
What many tend to overlook is that your revenue streams can be diversified—your active income stems from your job, but you can expand and look outwards for other passive means of reeling in more money to build your wealth. Here’s where investing comes into play.
Investing is your way to stay ahead of the game, to beat and outpace inflation and allow your money to grow in the background as you’re working hard at the front. Rather than letting your money sit idly in the savings account, you can put it to work. As they say, don’t work for money, let money work for you.
What is investing?
To put it simply, investing is setting your money aside for any financial products, shares, property, or commercial ventures in the hopes and expectations of receiving profit in return. To invest, you’ll purchase assets that increase value over time, which in turn, provides you with returns in the form of income payments or capital gains.
Depending on your financial goal and what you’d like to achieve, investing can be short-term or long-term. Some invest for quick gains, while others look towards building wealth in the long run for themselves, or even their loved ones in the distant future.
Why is investing important?
Investing is key to leading a financially stable and prosperous life, wherein you’re able to achieve all of your financial dreams and goals that you’ve set out for yourself. Therefore, investing is important, and especially so for the following reasons.
Secure higher returns
Savings accounts will not do your money justice, because the returns there will have virtually no impact on your money at all. In other words, setting your money aside in your savings account—other than for emergencies—is a waste of potential.
By investing, depending on the amount of risk you’re willing to bear, you’ll be able to effectively secure higher levels of returns and profit. In that sense, you’ll be putting your money to work instead of letting it stew in your savings account.
Safeguarding your future
Even though your retirement is years ahead of you, many invest to ensure that when the time comes, they’ll be able to live freely and enjoy the life they’ve worked very hard for.
Your income on its own is probably just enough to meet your needs as you’re working now, but when you’ve closed that chapter and are no longer employed, how else can you make sure that you’ll have the money you need to enjoy your golden years?
By investing and building your wealth from the get go, you know you’ll always have a safety net to depend on. While you’ll have government pensions that you can use, it’s always good to know that you’re protected and can live out your dreams and hobbies without any limits after you’ve retired.
You can’t run away from inflation, no matter what you do. When you place your money in a savings account, best bet that inflation will eat away at the value of your money, which would basically render your efforts of saving for the future to be of no use.
Especially in terms of education and healthcare, costs are at a steep incline. By the time you’ve hit the mid-mark of your life, you may find yourself paying almost double or triple of what you might’ve today. If you don’t want to find yourself troubled in the future over the lost value of your money, invest to maintain or up it.
Achieving financial independence & success
Ultimately, investing is key to securing financial independence and success. Rather than having to lead a life of paycheck to paycheck, you can be freed from the shackles of any and all financial stresses. Beat inflation and sustain the value of your money so that you’ll be able to enjoy your life spending on whatever you need, whenever you’d like. Live your life to the fullest without being held back financially!
When should I start investing?
Your investment journey should begin as early as possible. No matter if you’re fresh into your 20s, just having graduated and about to enter the workforce, that’s possibly the best time that you should kickstart your investments. That isn’t to say that it’s too late for you if you begin investing any later, because it truly is never too late to start anything, but investing at a young age will provide more options and opportunities for you.
If you invest early, you’ll be able to earn due to compounded earnings, which will allow your initial investment to snowball over a long period of time. With that said, to earn high returns, you wouldn’t need to increase your risk as you would effectively be leveraging time instead to build your wealth.
What are the rules of investing?
As a beginner, here are the three rules that you should always keep in mind.
Invest for the long-term
Investing isn’t a get rich quick scheme. The idea behind investing is to be patient and allow your money to grow over time, which is why it’s an excellent idea to start as early as possible.
Don’t walk in with the expectations that your investments will double in returns overnight, as it will definitely take much longer than that. Don’t get into it for the short run, because you’ll stand to earn so much more if you’re patient and play it out well.
In your portfolio, the key to making sure that your risks are spread out evenly and that you wouldn’t lose your entire life’s worth of savings is to diversify. Don’t put all of your eggs in one basket but investing everything into one stock. Explore other financial instruments that pique your interest and try them out too! Plus, the more you diversify, the higher your chances are at higher returns too.
To mitigate timing risks, it’s best to look at dollar-cost averaging and invest a fixed amount of money at regular intervals. Dollar-cost averaging will help you manage price risks when you’re buying stocks, exchange-traded funds, or mutual funds, so that you’ll be able to reduce the impact of volatility on your portfolio.
The idea behind it is that if you’re investing in small amounts consistently, you’ll be able to smooth out your average purchase price as a whole.
With all of that said, we’re sure that you now have plenty of information to consider and sleep on before you get started on your investment journey. While it may be daunting at first, rest assured, it does get easier over time as you learn how to manoeuvrer it better and manage it all on your own.
If you find that you need assistance at the beginning just so you can get it going, know that we’re more than willing to help you with it! With a team of professionals that has years of experience in investing and managing portfolios for our clients to achieve financial independence, we hope that we can do the same for you as well. Reach out to us today to kickstart your investment journey today!
DISCLAIMER: All information are for informational purposes only and should not be relied upon as financial advice.