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Why you should start investing early

Why you should start investing earlyIt is advised to start investing early as it allows you to truly benefit from the compounded interest you yield, and there are several options you can explore.

Importance of investing

While the need to save is a common talking point amongst people, perhaps another equally important concept is investing. Saving, as admirable as it is, does not necessarily lead to any returns on your initial funds, therefore, it does not take the time value of money into consideration. Moreover, depending on how you go about saving, you could end up with even less money that you began with. For example, some banks charge interest fees on savings accounts, meaning that at the end of every month a certain amount will be deducted from your funds. In the long-run, you will have far less than what you initially put into the account. Although, some banks do offer interest-yielding savings account, but the returns are hardly as notable as those from investing.

When it comes to investing, a lot of people advocate for an early start. This is because compound interest is usually applied when you invest, therefore, the early you start, the higher the overall compounded interest you will enjoy. For some, saving is the starting point and once they have accumulated sufficient funds, they then explore various investment options. One of the fears of many people when it comes to investing is that it comes with a certain level of risk and potential to lose your money. However, it also comes with an attractive chance of possibly making even more than you had initially imagined in the long run.

Tips for investing

There are many investment options that one can look into, and some of the popular ones are stock trading, real estate and forex trading, amongst many others. When it comes to forex trading, the inclusion of the USD in your forex investments is expected. This is because the US economy is very active in global trade and the USD is used as the base currency in many parts of the world. It also forms part of the major currency pairs, which are the most traded. That being said, there are some key things to consider when you start your investment journey, some of which have been noted below.

  • Consult a Financial Advisor

While some might argue that this step is not necessary, consulting with an expert in the field is always useful. A financial advisor will be able to objectively assess your financial standing and determine whether or not you are in a position to embark on your investment journey. Additional factors that will be taken into consideration may be your debt ratio, disposable income, current monthly income and expenses, etc. All of this is used to determine where you are financially.

  • Determine Your Risk Tolerance

Before investing in anything, you need to decide whether you are looking for short-term or long-term returns and whether you are willing to take a higher risk for a potentially high return, or whether you are merely willing to take a smaller risk while testing the waters.

  • Thoroughly Research the Options Available to You

As already mentioned, there are several investment options that one can explore and thoroughly researching the ones that appeal to you will help you make a more informed choice. The option you choose will most likely be guided by your risk tolerance and financial resources. Because forex trading is more flexible than real estate, for example, someone who is just starting out and does not have the money to purchase property may pursue forex trading first.

  • Diversify Your Portfolio

This cannot be stressed enough. Experienced investors and industry experts always advise diversifying your investment portfolio where possible. If you are into commercial property, you may want to dabble in residential property too as a more subtle way of diversifying. The benefit of this was seen in 2020, where office spaces were no longer in high demand because of the global move towards digital and remote operations. In turn, people prioritized their residences and having a suitable property or home to work from.

 

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