How to Start Investing?
Everyone wants to get rich. We want to have enough money or savings to support our lives without us working to the point of exhaustion. We want to have the financial stability to live a comfortable life and buy all the things we need and want.
However, the reality is that earning and saving money is a difficult thing to do. Aside from paying our bills and other financial obligations, we’re often tempted by impulsive buying which drains our money fast. How can we practice the discipline of saving and letting our money grow? According to the financial experts, it’s time to start investing.
What is Investment?
Most working adults often heard about investments as they manage their finances. We’ve heard how investments will allow our money to grow up to 12% (or more) each year, letting us build our retirement funds to reach our financial goals. Most financial experts advise their clients to invest their money either in stocks, shares, mutual funds, and bonds to have a solid starting point.
However, you may notice that not all investors are willing to take risks. In fact, studies show that most working adults prefer not to engage in investments at all since they couldn’t understand how it works, let alone where to start.
Most of all, they’re afraid of losing their hard-earned money due to the risks associated with investing. But before you decide to drop the idea of investing, these financial experts laid out some guidelines to help you on how to invest right.
Diversify Your Investments.
Remember the former giant US energy company Enron? Not only did its workers lose their jobs when the company went bankrupt, but they also lost their pensions and retirement funds because they invested most of their money in Enron shares. Some investors who solely rely on investing in Turkish stocks are also experiencing this dreading feeling too.
As a rule of thumb, try to invest 2/3 of your long-term savings (like retirement funds) in equities or stocks and have your short-term financial goals invested in bonds.
It’s also recommended to invest in other companies like Apple, Facebook, Amazon, or other types of investments like mutual funds, forex trading, and others depending on your areas of interest to allow maximum growth and potential in your investments while managing and minimizing the risks.
Don’t Be Afraid to Take Risks
Whether you’re too young and or too old, your money won’t grow to its maximum potential if you keep on investing it in “safe” bonds. Oftentimes, the interest rate of these safe bonds is too small it can even be beaten by the inflation.
Moreover, most companies tend to use conservative investment schemes for your retirement funds to minimize their fees. The financial experts recommend you take manageable risks if you want your investments to grow. You can do this by logging in to your company’s pension scheme and make sure to check the default allocations they set.
You can simply change it if it’s too conservative or low for you and you can start increasing your contribution.
Pay Attention To Your Charges
Most investors make the mistake of focusing too much on their investments and potential returns that they forget to pay attention to their fees and charges. Take note that as your investment returns start compounding, so do your fees and charges.
It’s important to switch to indexation and eliminate any middleman to minimize your fees. Or if not, you may opt to download low-cost tracker funds to help monitor your costs.
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