If you are aiming for those high returns, investing is not just about having your money in the right place; it’s also about having your body and your mind in the correct frame.
Investing is normally perceived as complicated and a recent report from Merrill Edge showed that millennials are opting for saving rather than investing because they are of the view that saving is safer. This is not surprising because a lot of people still remember the 2007-2008 global financial crisis which affected investments badly. Investments are rarely insured and carry a higher risk of losing out than saving, therefore, opting for saving has become the new precautionary measure in case we end up in crisis again.
Despite the saving trend, investing still remains one of the ways with which you can actually build up some decent wealth. Think of the average 0.06% savings interest rate (some institutions do offer yields closer to 1%) that is nowhere near the rate of return on investments which is normally upwards of 10%. Instead of shying away from investing and the risks attached to it, it is essential to understand that investing is much more than just thinking about the money. Investing is about being smart and having a disciplined approach to the whole process and not just the money part. Now is not the time to think about investing hard; it is time to be smart and to keep things simple in order to get high returns.
Source: Shawn Roe
The financial, money bit, is still important…
There is no way to invest successfully without looking at the money, so yes, the financial bit is still important. What is interesting though, is how it usually seems like there is some competition between investing and saving when these two things are clearly different and they each come with their own risks and rewards. Why does it always have to come down to deciding which is best? Why can’t we do both?
This may all sound ridiculous because firstly, where would you get the money to save and then have some left to invest or vice versa; and secondly, isn’t investing just better? The good news is that no one gets to dictate that only one is better except you. Taking a comprehensive approach that seeks to merge investing and saving will show you that both are totally doable once you simplify the numbers involved.
When people think or talk about saving they think about banks, but on a very simple level, banks are like most businesses which exist to make profits. If you are just starting out with nothing, other options are probably more viable because the last thing you want is to worry about where you will get money for the bank charges. Something as simple as putting away $10 a week and being disciplined enough to do it every week is effective saving which will result in having over $500 by the end of the year. Guess what, you can start investing with a minimum of $5, although $500 is normally viewed as a better start, and it is all possible by just going through 12 months. A year from now is better than a year starting in 5 years’ time when you could actually be somewhere way better.
Having a lot of money is not necessary to start saving or investing – the vital part is having enough drive to start and enough knowledge and willpower to grow. Opportunities always present themselves to those who have determination and diligence. Sit and think that it’s hard, and you will never get anywhere; take the first difficult steps, and you are well on your way to greatness.
Knowing what to invest in is another important feature of investing and saving for good returns. Your investments will depend on how much you have to start with and your risk appetite; some investments have a better risk profile and potential returns than others. No matter the investment or savings plan you decide to go with, you have to invest often and as soon as possible. There is no point in putting some money into something once and never tending to it again. Some potentially excellent savings and investments you can make to get good returns are:
- Investing in high-interest saving accounts
- Mutual funds, and more specifically; low-cost, diversified index funds
- Some real estate
Whichever route you decide to take, make sure to diversify your portfolio because this reduces your exposure to risk and helps to maximize your benefits.
Understanding the risks attached to each investment option will allow you to make up a portfolio that gives you the most return. In addition to diversification, you should also make sure to automate your expenses and invest for any big purchases. Automating expenses means that your bills cannot pile up and hinder your progress to financial freedom (think how accumulating credit card debt can harm your finances). Investing for big purchases means that any big purchases should have their own investment plan. You do not want to be looking for money to make the big purchase when you want it, you want to start saving for it now.
But two other bits are just as important, if not more important.
So what could possibly be more important than the money?
How much you know and how healthy you are.
Your knowledge will be the difference between making big returns and not making much. Investing is best done with companies you have studied and know well. If you know a lot about saving and the kind of companies you want to invest in then you will know what needs to be done, and when it should be done. Knowledge will allow you to know what is trending, what will make you the most money without exposure to unnecessary risk, and how and when to diversify (some diversification can actually lead to losses).
Without knowledge, you will be unable to grow your networks, and it is these networks that will open up bigger and better opportunities for you. If you take time to read and understand investing, and you go out of your way to understand how the successful investors have done it, you will already be better than most people who do not take the time to invest in their education and knowledge. Warren Buffet, one of the greatest investors of our time has this popular quote:
“The most important investment you can make is in yourself.”
This quote sums up how becoming wealthy depends on how much you know and not necessarily how much you have.
Your health is another investment you need to make if you are to get a proper shot at success. There is no point in working hard, accumulating knowledge, and building the right networks if you are not going to be around long enough to enjoy all of it or if you are going to spend all your accumulated wealth on costly medical bills. Taking care of your health is a crucial part of the plan which needs serious attention. It is not only physical health that you should take care of but your mental well-being as well. Investing in your health means you will be around long enough to enjoy the fruits of your labor.
Success is a choice away
You may not have large sums of money to invest right away, but with some strength of will and intelligence, you can start investing wisely and effectively for a better future. Together with your knowledge and health, the trick is to make money work for you rather than working for money. Consistency is also one sure way of guaranteeing success over time. When all is said and done, there is no better time to start than now.