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There is an old saying that the best time to start investing is right now. It definitely sounds cliché and is certainly easy to dismiss the underlying wisdom in this tired old saying, but truth be told, it speaks the truth. The trouble with investing for most is getting over the fear and anxiety of doing things with your money that you’ve never done before.
The fears are certainly warranted as we have all heard horror stories of people losing their life savings or placing trust in a financial advisor that took off with their money. But the reality of investing is that it is one of the best things that can be done to help secure a financial future that is free of worry and anxiety.
The sad truth is that the majority of retirement age people struggle to get by financially and wish that they had made smarter decisions with their money in their earlier years. That is where the truth lies in saying that the best time to start investing is right now.
Okay, But Really Convince Me
There are few things that are more enjoyable than financial peace of mind. Few people actually achieve this state of nirvana, but it’s not too difficult to get on a path that will lead you there one day. The best thing to do with your money is to save it and invest it over as long a period as possible so that it can double, then triple, and even quadruple over time! When you figure out the secret to making your money work for you instead of the other way around, you’ll feel great about your financial health in the short and long terms.
The first thing that gets asked about making money do the work is how this is possible. Well, there’s a couple of ways.
Dividends
When you invest in a company or in a mutual fund, it’s like loaning your money out to be used by the company that you’ve invested with. Many companies thank their investors for giving them their money to loan by paying back dividends. A dividend is paid to investors by a company and is the same thing as the company paying you part of their profit in accordance with what you’ve invested. The entry fee to corporate dividends being dropped into your bank account is whatever you choose to invest.
We’ve all paid interest on a purchase, now let someone else pay you interest.
Asset Value Increase
A simpler way that your money can start to work for you is when the value of a share increases after you’ve invested. For example, if you buy 10 shares in company “X” for $10 dollars each, and you take a look one year down the road and the price of a share is now $20, your money has worked for you.
You may wish to sell your shares at that higher price, and no one would blame you for doubling your money. You could take those earnings and reinvest them somewhere else hoping to repeat the process, or you could always leave your initial investment alone and see where it takes you.
Long-Term Growth is Key
When you’re newer to the investment world, there are so many terms that are thrown out there that it’s easy to become overwhelmed and hold off on getting started. Every financial planner will tell you that waiting is the worst thing to do when you’re looking to plan for a large purchase down the road or even your retirement.
When you see commercials on television that talk about saving for retirement, they aren’t talking about saving in the sense that you may be thinking. Instead, financial firms encourage individuals to “save” in the sense that money is being put aside into a retirement investment account such as an IRA or 401(k). Unlike a savings account, these types of account invest and reinvest the money that is deposited every week or few weeks to multiply its overall value to the greatest extend possible.
One of the greatest things about investing money over the long haul is what is known as compound interest. In short, compound interest is the idea that the money you invest gains interest and increases in value to a higher amount, and then that higher amount of money earns interest and increases in value even more. Repeat that process for however many years you wish, and all of that money you’ve invested and gained in interest will be yours to use as you please in retirement.
You Will Not Get Rich Quick
On the flip side, there are those who believe that investing is synonymous with hitting the lottery. Sure, there are many people who have done quite well for themselves through the stock market and by making timely investments. But for everyone Warren Buffett, there is literally a billion other people on this earth who are not so lucky.
Truthfully, only you know how much risk you can handle and if you don’t know, talking to a trained and licensed professional advisor is where you should head before making any investment decisions. Whatever you do, you absolutely must understand that there is risk involved with any investment. Instead of seeing it as a tool to get rich, you’re far better off looking at it as something that can make you go broke quick if you’re not careful. And that’s not to say that you should be fearful, it’s merely some words of wisdom so that you may maximize your financial gains and pave the way to the best future possible.
The Bottom Line
Investing is easily the best financial move you can make right now. The younger you are means you’ll have more time to see your portfolio grow and maximize your investment period. However, age is not important when it comes to deciding whether or not to invest right now. Whether you’re looking at a few years down the road or a few decades, putting your money to work is a vital part of assuring long-term financial wellness.