Investing...
You may be asking yourself:
- What is investing?
- Investing is a way to store frozen time for future use.
- Do I really need to invest?
- No. Investing is not for everyone. Some just need to save.
- How does investing help me?
- It allows you the luxury of future opportunities.
- How can I start investing?
- Start with saving. Once you know that investing is next.
Investing
Long ago when money became the common method of trading, ways of investing that money were soon discovered.
In today’s world around 39% of the global population trade their time for wages. (We’re gonna dive into this statistic later.)
This means that just under 3 million people trade their time for money. If time = money then it is safe to conclude that money is simply frozen time.
If you were to trade 10 hours of work for $100 that $100 is equivalent to freezing 10 hours of your life. If you loose this $100 well seems like you just lost 10 hours of your life.
Investing is taking this frozen time and making it work for you. By putting your hard-earned money to work it starts to work for you, paying you back in little amounts called dividends.
Do you need it?
Investing is not for everyone. As mentioned only 39% of the global population are in what some call the formal economy, or the economy regulated by government bodies.
With that said already 2/3’s of all humans are unable to invest as easily as we in developed countries are. Chances are if you’re reading this you are in a formal economy. If not then I am praying crypto will be your salvation.
If you are blessed enough to participate in a formal economy it does not necessarily mean investing is for you. If you know you have large upcoming expenses, unknowns in your life, or any other major life event, saving (Read More Here) cash is the best thing you can do. Cash is safe (investment-wise), easily accessed, and instantly redeemable.
Can it help?
If you believe that you will have some sort of future, investing will definitely help. Life goes faster and faster the older you get, because of this the time you freeze (money you save) is worth less the older you get.
For this example, you are planning to save $250,000 for retirement by the age of 50. Starting at 30 you are able to save $10,000/year after taxes. This money is then put into a fund returning 5% per year. By 50, you will have an account worth $330,658.22. Over $80,000 more than your target amount.
Now let’s start again but this time the money is saved and not invested. Depositing $10,000/year into your bank account you earn 1%/year. When you turn 50 you now have $220,189.16 in your account. A few years light of your goal, and over $110,000 less than the first example.
This is a phenomenon created by compound interest and is why investing is so powerful.
How do I start?
As I mentioned earlier before you start you will want to make sure you have an emergency fund saved. An emergency fund is a savings account holding 3 to 6 months’ worth of expenses in the event an emergency occurs.
This is not money that you use for anything, it simply sits there until needed. This money is separate from your monthly income that should completely cover your bills.
Once you have this fund saved now you are logically able to begin investing. I say logically because this is a critical component to a successful long-term investment strategy.
Before beginning you first must identify your investment goals. Whether it is to get rich quick or build security for your future you must have a general idea of what you are aiming for.
Once this idea is established you are ready to start researching. The fact you read this article is a good sign for your journey.
Let's Make Some Money!
Whoah, whoah, whoah...
let’s slow down for a second. While investing is technically about making money you must first learn discipline in your strategies. Investing is all about finding a strategy you believe in and sticking with it through the ups and downs.
Like relationships, there will be good days and there will be bad days. Like any good relationship, work on your strategy in bad times so you find your way to the good.
What are some common strategies?
– Precious Metals (Safest)
– Government Bonds (Safer)
– Index Funds (Safer)
– Real Estate (Safe)
– Individual Stocks (Risky)
– Cryptocurrency (Very Risky)
How do I know which to pick?
These are some of the most popular investment vehicles used by your grandparents all the way to the titans and their billions.
At the top are the safer investments. These are ones that will generate less money (returns) but are less likely to lose money. At the bottom are the riskiest investments. These grow much faster but can fall just as hard.