We have always been accustomed to the thought of saving up. That’s where the line “saving up for the rainy days” came from. But the sad part about saving is that when you’ve used it all up because of that “rainy day”, you’re left with little to nothing. That’s where investing comes in.
What does it really mean to invest?
While saving is to save money in cases when you need it (car fund, house fund, emergency fund), investing is for wealth building. When you invest, the money you’ve invested won’t come back to you any sooner. In investing, there is a certain time frame and a risk of course, but when it’s left alone long enough and has survived the ups, downs, and even turns in the stock market, it will yield much greater gain.
Now that it’s all clear. Do you need to ask yourself again, “Should I just save or maybe invest?”
Let’s break it down shall we?
Now, keep in mind that saving goes first before investing.
There are two primary types of savings programs you should include in your life. They are:
As a general rule, your savings should be sufficient to cover all of your personal expenses, including your mortgage, loan payments, insurance costs, utility bills, food, and clothing expenses for at least six months. That way, if you lose your job, you’ll be able to have sufficient time to adjust your life without the extreme pressure that comes from living paycheck to paycheck.
Any specific purpose in your life that will require a large amount of cash in five years or less should be savings-driven, not investment-driven. The stock market in the short-run can be extremely volatile, losing more than 50 percent of its value in a single year. – more here
Only after the above mentioned are in place can you invest. How should you start investing? Before you start investing you should ask yourself the following questions.
- What are your goals?
Knowing where you want your money to go and what it’s actually for can give you a great outline about what path you’d like your investment to go to.
Are you saving up for retirement? Or maybe for buying a new property? Goal setting is very important. When your goals are straight, you’re on the right track in investing.
- How old should you be to start?
Your age is important because this defines the amount of risk you’re willing to take. When you’re 15 and start investing – you really have nothing to lose because you’re still young. If you start investing this early, the more comfortable you are in taking risks. But when you’re in your 40’s or 50’s, you’ll need to consider many things before actually investing. You’d be considering your family, your current financial status and you’d be wearier of the risks.
- How much time are you willing to give?
Considering the number of terms and technicalities that go with investing, you must consider how much time do you have to learn these things? Remember also to be honest with yourself once you’ve known these.
“Experts and investors say beginners should consider exchange-traded funds (ETFs) that follow a wide range of stock, or sometimes the entire market.
Some ETFs, such as SPY ($205 a share), track the S&P 500 — an index of 500 of America’s biggest brands. Generally these investments are less volatile than an individual stock, and they grow over the years. SPY is up almost 80% over the past five years because we’ve been in a bull market.”
- What’s the cover charge? You must always keep an eyes out for the fees, whether it is in ETFs, individual stocks or any other investment you want to put your money on.
– For more details about this topic, click here.
Once you know all these, go ahead and start buying!