From young, we’re generally taught to save. If we were lucky enough to have an allowance, we were told to put some away. Maybe we had a tooth fairy who gave us some pocket change, again, we were told to put some away. Saving is something that most of us understand, and practice as much as we can.
But saving is not investing.
A simple truth in our world is that there’re two general ways to make money: either you work for it, or your assets work for it. It was true for our parents, and it’s true for us. And if you believe the numbers, it’s much more relevant for us, as we typically have more disposable income than our parents.
But what to invest in? Property? We have all heard about so many people making it rich in property. We probably even have a relative with a great story of how their humble beginnings were given a leg up by a timely En-bloc. Seems like a great place to invest! Or maybe shares and Forex? There’re so many amazing stories of investors making it rich. Great bets placed at critical times. Fortunes being made! Or your own business? Be the master of your destiny. Control your future.
All of the above are great investments. And all of them could be the wrong investment for you. Any investment should start with a clear statement of goals. You need to answer one simple question:
Why are you investing?
From the answer, you can determine timelines, expected rates of returns, appetite for risk, etc. Suddenly, you will have boundaries, and parameters to define what a successful investment should look like. And, importantly, what costs are you prepared to pay to achieve those investment goals.
If you’re still young in your investment journey, your immediate goal may be to provide a roof over your family’s head. A first home is essential, but the investment return on the first home may not be the highest priority. Home comfort and security may rank higher – and rightly so! But how do you even build a nest egg that is large enough to place the deposit of the first home? How long does my family have to wait? How much should I borrow? Every young family has had to answer these questions.
Perhaps you’re further along in your journey, and would like some exposure to something with a little better returns. 6% a year sounds great. 8% sounds even better! Maybe even 20%! But what about risk? What about potential losses? What kind of investments even give me a return like that? Will the returns be lumpy?
The point is, we all need some help to achieve our goals. Talking to experienced professionals is a good, cost effective way of educating ourselves, and getting the answers to some of the questions on our mind. It helps us all see a little clearer, charting what the path ahead should look like.
Here are some simple truths we’d like you to consider when thinking about why you are investing:
- Start as early as possible. Timing the market often results in a poor decision, rather than a good decision. None of us has a crystal ball that predicts the future. Generally speaking, starting an investment strategy when you’re 22 years old, leads to a better result than starting at 30 years old.
- Saving cash is great. Investing cash is better.
- You only have 24 hours a day; the same amount as everyone else. Use your time wisely. Remember, you can either work for your money, or have your assets work for it. Investments are generally the only way you can earn more than someone else who is in a similar situation to you.
- Costs matter. Anyone who tells you that investment costs don’t matter is doing you a disservice. Costs absolutely matter, especially in the long term. Costs merely facilitate and don’t actually provide any investment return to you.
- Don’t be afraid to win, or lose. Learn from your wins, learn faster from your losses.
This is an original article contributed by Providend’s Editorial Team.
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