Start investing early – best chance to compound and grow your money
Investing from an early age gives people the best chance to grow their money and witness substantial returns in the long-term. The sooner you start the better chances you have to live comfortably by the time you retire. Start by putting your finances in order, and picture the following scenario: invest $100 per month in the stock market. Grab the 8% annual interest, and your investment will grow to over $100,000 by the time you reach 45. On your 65th birthday, you’ll be worth a whopping $500,000 on average. Now that should be enough to help you live comfortably for another 30 years.
With every year that goes by, people’s needs change. Short-term investment may work for 1-2 years; but what will you do if your plan goes down the drain afterwards? It’s very important that you invest in something you can understand – whether it’s real estate, bonds, stocks, fine wine and more.
Take a risk
When placing a bet on a specific company or investment sector, it’s never a good idea to be ignorant and let other deal with everything. If you can’t understand the type of business you’re about to spend money on, you shouldn’t do it. Take a risk and start from an early age. You have the highest chances to see your money grow and compound if you start now. Rookie investors who start early, are patient and abide by a long term tactic have the best chances to experience financial success.
Who doesn’t like free money that never stops growing? However, according to recent data, 3 in 10 employees don’t take advantage. If you have an employer with a matching contribution within their company’s plan, it’s very important that you contribute in order to get something in return. If you don’t benefit from the matching contribution, you’re leaving a lot of extra money on the table.
Set objectives and emotions apart from each other
Don’t confuse an investment with a hobby because you’ll end up suffering. It’s best that you separate your emotions from your goal; this will lead to better performance and improved overall judgment. Be open-minded when it comes to investing, and see each deal from a different perspective. This will increase your chances of spending money on something that’s undervalued and with great investment potential.
There are people who can’t understand that there’s a huge difference between needs and wants when it comes to investing. Cable TV packages, cell phone bills, and other services of different kinds become necessities gradually. Someone who’s serious about investing to make a profit should pay more attention to their discretionary income. It takes discipline and organization to keep your finances in place and, at the same time, be able to save a particular amount for investing each month.
Cash reserves and investments should be placed in separate ‘buckets’
One of the biggest mistake people make when investing is take money out of that investment when times get tough. Don’t mix cash reserves with your current investments, and keep them as far away as possible from each other. Don’t take from one ‘bucket’ to fill in the other. Turn your attention to the stock market, and make stocks your priority. Believe it or not, this form of investment is one of the best wealth creation tools ever invented. Investors need stocks to help their portfolio grow, keep it diversified and thus outpace inflation.
Be rational when choosing a type of investment and try to understand that your portfolio may need tweaking from time to time. You don’t have to start all over again to fix imperfections and just because you’ve made some bad decisions, it doesn’t mean you have to give up either. Smart investing is an activity that spans over years and years; it’s something that you’ll be doing long-term if you want to see great returns, and not something you can rush to make a quick buck.
Mistakes can happen, and a savvy investor is well-aware that no investment is 100% sure. In today’s turbulent financial market, it might be a good idea to consult with a professional. A financial planner can help you stay on the safe side, and not jump into the first deal that seems appealing. He has great knowledge about the latest finance software programs out there, and he can help you make the best decisions.
Guest Post By: Steve Brown and Synaptic.co.uk