A generational money myth that still runs deep today: Savings lead to wealth creation and financial freedom.
While saving does achieve both, smart investing makes the concept of wealth creation, and hence, financial freedom more attainable. Never depend on a single income source. Invest to create a second source.
Apprehensions to investing aren’t uncommon: it boils down to financial loss as opposed to financial gain.
Losing your hard-earned money is not an easy thing to process and would eventually lead the person to put their money in an FDIC-insured bank account. However, here’s the catch – low interest rates that savings accounts offer cannot keep pace with the ever-increasing inflation.
This means money’s purchasing power decreases the longer one saves, guaranteed to lose value.
On the other hand, making informed decisions and betting one’s investments at the right places can – reduce the risk factor, increase the reward factor and generate meaningful long-term results.
Saving is an indispensable part of the financial toolbox, providing the capital imperative to invest: on a minimum level investing allows one to keep pace with cost-of-living expense-upswing created by inflation; on a maximum level, long-term investing opens the possibility of compounding interest.
Given that each investor decisively enters the market because of a unique circumstance, one doesn’t have to be a market expert to begin investing.
Furthermore, the investor needs to analyse their personal investment goals. – An investor who is looking to generate a second income through investing or amass a large enough fortune to retire on, will make much different investment choices than an investor who is merely seeking to earn a little interest to help offset inflation and protect his/her purchasing power.
1) START SMALL, SET A SUITABLE BUDGET:
Understanding one’s financial expenses and being realistic about an investor’s expenses determines how much does he/she shells out towards their investment strategy: how much can one regularly contribute to their account; when one opens their account and the securities one invests in.
Despite other major financial obligations, the investor should never underestimate the power of starting small and working towards setting a suitable budget.
On a side note, while it is wise to pay off any high-interest debt before investing large sums of money, this does not mean that the investor cannot start investing at all.
2) FIGURE THE KIND OF INVESTOR YOU ARE:
The longer the time horizon, the more risk the investor may be able to take overtime whereas, If the investor is more of a set it and forget it type of person, they may be more inclined to invest in funds that give exposure to multiple holdings instead of buying individual stocks, bonds or other assets.
3) OPEN AN ACCOUNT, START INVESTING:
As a novice investor, one can start with as little or as much money as one would feel confident putting aside, even small amounts of money, invested at a consistent pace that works for the investor, can result in a sizable portfolio balance over time – the investor shouldn’t worry too much about their opening deposit, but remember and try to add funds regularly to their account.
4) KEEP A CONSTANT CHECK ON INVESTMENTS:
Like anything that needs regular maintenance, the investor should always check on their investment portfolio regularly – set a constant reminder to review one’s investments.
Ultimately, investing is a skill, part art and part science – a practice every investor engages in and employs with a quest to become financially empowered.
Regardless of whether the investor becomes a market wizard or any other average investor, with time and dedicated investment planning, the investor will have the freedom to live up to his/her dreams and attain financial independence.
