When Covid came and went, we all breathed a sigh of relief that the world would perhaps return to normal (or at least some form of normal). However, while not having to self-isolate and wear facemasks is undoubtedly a great thing, a global lockdown has the uncanny ability to mess up the entire financial systems we rely on all the time. For numerous reasons not really in the scope of this article, many of the wealthier nations plunged into dire straits, with inflation skyrocketing and making all the things we need to live our lives comfortably unbearably expensive. Although it is slowly moving in the right direction, inflation appears here to stay, and if you have not yet started to manage your finances, you really need to begin so that you can avoid seeing your hard-earned money melt away as it slowly but surely depreciates in value. This post will explore a few easy investment tips that most average folks can use to help them put some cash aside for a rainy day as well as build up their wealth so that when the time finally arrives when you can retire from work, you will have a nest egg capable of supporting your thought your twilight years.
Table of Contents
Start Early, Invest Consistently, And Reap The Rewards
Putting your money to work is arguably the best way to avoid the pitfalls of leaving it as cash to depreciate in a bank account and make it grow almost passively. However, one of the main reasons why so many are put off from doing so is that they are often worried that their investments’ value may decrease, and they end up losing everything they have worked so hard for. It is undoubtedly true that most investments can go up as well as down, but with a little knowledge of the various instruments, you can make it more likely it will be the former rather than the latter. If you really want to maximize your income, investing in a managed fund could be the way forward, but what are managed funds, and how do they work? A managed fund is a type of investment where your money is placed in a pool of money from other like-minded investors and is then used by a professional fund manager to buy a variety of assets with a plan that the fund will accrue in value. This is typically the best way to begin your investing journey as it takes much of the legwork away from the process and puts someone who lives and breathes finance in charge of making the crucial decision about where to place the money.
Diversify To Lower Investment Risks
If you are worried about putting all of your eggs in one basket, which you should be, then you really need to diversify your investments over several asset classes. For instance, if you had $10,000 cash, you might choose to chop it up into different investments, including the managed fund as per the previous tip, an ETF that tracks the S&P 500 or whatever index that’s related to your country, and some in a money market fund that allows you to accrue interest based on the central bank rates. The idea is to put your money in places that make you the most comfortable. For example, if you believe you will need to dip into it sometime in the future, an MMF that adds interest to your initial sum each day may be best. This is because most MMFs allow you to dip in and out as you please. Conversely, if you are in it for the long game, putting more into a managed fund of some description may result in better gains over time.
Consider Long-Term Goals And Stay Patient
Life has a habit of getting in the way of everything we attempt to do, and money is no different, but if you really want to plan for the future, you need to think long-term and avoid thinking only in terms of a year here and a year there. Compound interest only really kicks in once you reach a critical mass, and the longer you leave your money in an investment, the more it will rise in value. When starting out, the best thing to do is to evaluate your investing horizon and consider how long you want to keep your money invested in an asset. Most of the time, this is split into five years, ten years, 20 years, and 40 years. If you are able to add a small amount each month to the investment you have chosen, you will find that after 40 years, it will have risen so much that you can begin drawing it down and using the money to spend on whatever you desire.
Monitor Investments And Adjust As Needed
There is no such thing as passive income, and while investing is as near as you might get, you still need to nurture and look after it. If you want to earn the most value from your money, it pays dividends to keep an eye on it at certain intervals and move things around if required. However, there are right and wrong ways to go about this. Most people will invest and then follow the news cycles incessantly, constantly worrying whether they made the correct choice. This is bad for your mental health and terrible for building wealth. Instead, choose a period, like bi-annually, where you will speak with your financial advisor and see if any adjustments or corrections need to be made. The more you watch the charts going up and down, the more likely you are to make a terrible decision. Always remember that time in the market will yield better results than timing the market.
Seek Professional Financial Advice If You’re Struggling
If everything up until now sounds like advanced algebra, you can always opt to hire the services of a professional advisor. These guys have spent years in the industry and will have deep knowledge of where to place money based on your requirements, which will generate the best results. There will be a fee, but in some instances, this is money well spent as it allows you to sleep better at night knowing your money is sitting something building value rather than declining in monetary worth.
Using these tips, you can begin your journey toward financial freedom and the kind of life that you deserve. It isn’t a particularly easy road to travel, but with patience and the ability to invest your money wisely, your money will do most of the heavy lifting for you.