An investment involves either investing money into an asset or putting money aside into a bank account to accumulate interest in the future. Money plays an important role in society today and making a smart decision in investing at an early stage in your life can be a huge lifesaver. When you invest your money you are potentially building and creating a future for yourself. The main purpose of an investment is to increase the amount of money that you currently have over a period of time. An investment is anything from stocks, bonds, mutual funds, annuities and property.
What is the difference between saving and investing?
Saving money basically means putting money away for the purpose of using it at a later stage. The money which you are saving may not be used for long-term purposes such as planning your retirement. Investing on the other hand is a long-term plan which allows your money to grow to a larger sum. Investments are purchased products that go into a specified investment account whereas your savings are kept in a traditional savings account or a safe. When saving, the opportunity for growth is lower. Investments help you beat inflation and you earn interest on your investment amount which ensures that your purchasing power is high and strong.
What are the benefits of investing?
- Helps you stay ahead of inflation
- Investing helps build your future and wealth
- Investing will get you to retirement
- Helps you save on taxes
- Investing will help grow your money to meet your other financial goals
- The stock market allows you to sell your stock at any time
Key strategies for investing:
Invest at a young age - Investing can be quite tricky when you are young. The more time and effort you put into investing, the greater the opportunity for capital growth. We know that saving money does not come easy for everyone but it is important to start investing at a young age as the older you get the more beneficial it will become for your future.
Invest for as long as you are able to - As a young investor or saver, you will learn from your successes or failures. When you stay invested in the market, chances are that you are able to earn money on what you have already earned. You can also learn from others by asking for advice about their financial techniques, skills and what route they took in order to be a successful investor.
Make use of investment apps - One way to track and keep track of your investment processes is to download an investment app, especially if you are a beginner. You can do a short course or watch youtube videos to familiarise yourself with all the investment apps available. For example, Investing.com or Bitcoin trading.
Open a retirement annuity fund (RAF) - This may seem as though you are running ahead of yourself by thinking about retirement whilst in college. However, opening up an RAF investment can be a great opportunity to build your future and save at the same time. It is an investment that is long-term and for anyone that wants to have a comfortable retirement. This means that a monthly contribution is taken from the employee and employer towards your pension fund.
Spread your investments to manage potential risks - One of the biggest risks is to invest all your money in one particular market. By diversifying your money across different investments, it decreases the risk of losing your money. A simple way to diversify your money is by investing in mutual funds and exchange-traded funds. Both these funds have a large sum of stock and other investments within the fund than a single stock.
With all of the above mentioned, it is important to bear in mind the total return you will receive from your investment/s. If you would like to start investing at an early stage, it would be highly recommended to do your research before investing your money into the markets.