Investment is defined as committing your capital or money to a venture with the anticipation of making a profit or additional income. According to the world-renowned business mogul Warren Buffet, investing is a process which involves “laying out your money now in order to receive more money in future.” The main aim of any investment is putting your money to work in one way or another hoping that it will grow over time.
Why Is Investing Your Money Important?
Any expert will teach you that investing is not all about working “harder” but rather working “smart.” Many people work hard to earn a living and secure their future. Whether you work in your own business or work for an institution, working hard often requires you to not only put in long hours, but it needs you to make a lot of sacrifices. Such sacrifices include foregoing some things such as spending quality time with your family and friends. This might come with a measure of stress too. Therefore, it can only be prudent if you invest some of your hard-earned money for your future needs.
Investment is all about wisely prioritizing for your money. Spending your money always comes with instant gratification, whether you are going for that much-awaited vacation in some exotic holiday destination, eating out in a posh restaurant or buying new clothes. As much as all these things can make our lives wonderful and pleasant in the short term, they do little to secure our future. Investment needs us to give our financial future priority over the present instant gratification.
Investment presents you with the best opportunity to set aside some money, while you still have enough energy to work and have the money working for you. You can then expect to reap the full rewards of your sweat in the future. Hence, this makes investing assure way of creating a happy ending.
What is the Best Way to Invest Your Money?
There are several ways through which you can invest your money. You can use investing 101 tips and individual intuition in investing your money in stocks, mutual funds, real estate, ETFs or even in one’s own small business.
However, it is imperative to note that each investment method comes with its own pros and cons. Therefore, having a good understanding of how each of the investment methods works is very crucial in order for you to become successful. You need to understand things like what a mutual fund invests in, who manages the fund, the expenses, and fees involved, and whether there are any extra costs or penalties in case you want to access your money. These are some of the critical basics that you need to clearly understand before you make any move to invest your money.
As much as there is no direct guarantee of making money since investment, just like any venture, is a risk; you can increase the odds of succeeding as an investor. This can be achieved through putting in some hard work in doing research, analysis, or even reading a lot so as to enhance your knowledge on investment. This puts you in a position to become a better investor, as opposed to a person who invests blindly.
After learning why you need to invest your money and how to go about it, you can gradually move it to the next level and eventually become a guru at it. One of the most important things you can learn is how investing makes use of compound interest. Compounding involves the generation of more return on any asset’s reinvested earnings. It only needs reinvestment of earnings and time for it to work. Compound interest can grow your initial investment exponentially and hence it is ideal for younger investors and the most enticing reason as to why you need to start investing early enough.