With the advent of the globalized market and the internet, it has never been easier to start investing. Options are seemingly limitless and the knowledge and information is at our fingertips. Also, the reasons for such an endeavor are plentiful. We may want to be financially independent, invest in our retirement or our future generations. Maybe we are tired of our nine to five job and want to be our own boss. Or we just simply want to make our hobby or passion project a reality. Reasons can be much more personal in nature. For instance, we may want to free up our time for exercising, health, travel, or spending it with our family. Doing the math on the best ways for us, personally, to invest can be a real challenge. In 2018, the stock market was exceptionally turbulent and proved to investors worldwide that it does not go in a straight upwards line. Wall Street has had two stock market corrections in that fiscal year and the current one is the steepest one witnessed in a decade. So naturally, a lot of investors are worried about the future of investing. Luckily for us, there are plenty of ways to optimize our investments. Here, we will cover the most comprehensive ones and how to achieve them.
1. Getting an early start
Simply put, the earlier we start saving and investing the better results we can achieve. Reason being is that the younger we are, the more time our saved or invested capital has to compound. What compounding means is that in addition to earning money on our contributions, we also earn on returns over time. What we strive to achieve is that exponential money growth. As an example, if we invest a relatively small amount of money and let it grow for a longer period of time, it will usually mount to much more compared to a late, but large investment. It is important to always keep the information in the back of our mind that all investments are risky. We are never guaranteed to turn a profit. Sometimes, we can lose all that was initially invested. Starting early minimizes those types of risks by giving us more time to recover if such an event transpires. And if everything goes smoothly, our invested capital will acquire the snowball effect where it will continue to exponentially grow.
2. Keeping composure
It is important to keep a cool head when our chosen market suffers a turbulent ordeal. Like we previously mentioned, the stock market has had such a year. The truth is that for most of the people, such shifts in the market, even the more dramatic ones are objectively not a cause for panic. In fact, it is the panic and the withdrawal of capital from investments that hurts the market more than the primary trigger. The best thing to do when a market tanks is to simply ignore it. Plenty of people are governed in their lives by their emotions. When it comes to money and wealth, they are wary and cautious, it is in our nature. And that is when most investing mistakes take root, when we let emotion influence our money decisions. Instead, we can set up automatic deposits, beforehand, into our investment accounts. This way we are able to contribute without checking regularly at how the market is doing. When the markets are down, that is exactly when we want to buy. The general impulse will be to sell, to bail out. But if we keep our composure and buy when it is cheap, we can achieve great things when the market gets back on its feet.
3. End-to-end solutions for alternative forms of investment
Seeing how volatile the global market is as of late, more adventurous investors are turning towards alternative forms of investment. Traditional ones are the stock market, real estate, our personal career, etc. Alternative forms are investing in precious materials such as gold, silver, precious stones or collectibles. There are a lot of peculiarities that go into trading with these sorts of goods as it is a relatively new industry. In a sense, that is, that it has become mainstream to such a degree as it is today. Therefore, it is a good option to acquire end-to-end solution providers for such investments and business opportunities. We can take diamond trading as an example. Diamonds have the trait of keeping their value over time. These values come in many forms: emotional, sentimental, historical or just plain financial. There are plenty of characteristics (primarily the 4C’) that define and describe one. Solution providers such as the Australian Diamond Portfolio can provide assistance in selling all or a part of our portfolio. Finding the best options to a market for an individual diamond is a highly skilled endeavor and require special connections. It is important for solution providers to have extensive connections to auction houses, e-commerce platforms, dealer networks, etc. If they can add value to our transaction, then it is a sound path to take.
4. Over saving
People tend to go with what is safe, secure, and with the least amount of risk. That being said, it is not uncommon for people to save excessive amounts of money without actually investing. In the long run, we lose money, plain and simple. Inflation causes prices to rise. Depending on the part of the world we find ourselves in, inflation can be in a single digit percentage per year, or even a two digit one. That means the money we have now, will be that much less powerful the next year. If we could buy a pack of gum today and the inflation rate is 10%, the next year around we will only be able to purchase 90% of that same product with the same amount of money. However, amounts that we invest with compound interest will grow us additional money. The moral of the story is, money loses value over time. It is a natural phenomenon and is usually being kept in check. It is a sound plan to save just enough to safely start a business of our own. It is also a good idea to always keep certain portions as a buffer zone for those unpredictable events and rainy days. But we should not exaggerate the amount we need to keep in our safe. All capital that is not invested is a wasted opportunity. The moral of the story is to make our money work for us on its own.
5. Understanding and managing debt
Debts cost us money. More than that, they affect our ability to earn more and get what we want. It is like a boulder tied to our ankle. Sure, we could get far with effort, but wouldn’t it be great if there was nothing to hinder us in our path to financial independence? Debt can also render us powerless, out of control, and dependent on other people and institutions, the exact opposite of actually being independent. Debt repayment should be a top financial priority, even, if at all possible, before we commit to any substantial business endeavor. It is much easier to stay out of personal debt once we get rid of it. That is important because, as most experiences entrepreneurs will tell us, business debt is basically unavoidable.
For those of us wanting a comfortable and secure future for ourselves and our loved ones, investing is absolutely essential. It can be done in many more ways than one, depending on our situation, personal preferences, and passions. Long gone are the days when one can solidly rely on their regular job for income and security. The first step can always be the hardest, but once we get that taste of freedom that a secondary source of income brings, a whole other world of possibilities will open for us.