Stop Thinking, Start Doing: Here’s Why Investing Is For You
You’ve heard the spiel: investing is the best way to make your money work for you. Cash savings are important, of course, but beyond your emergency cash fund you need to think bigger. According to a survey from the Telegraph, “51% per cent of women have savings accounts, compared with 50% of men but 10% of women have a stocks and shares Isa (compared to 17% of men)”. That just doesn’t sit right with us. So, if you’re new to the world of investing - just breathe, and read on. You can (and you will!) nail this investment thing down.
First off, to boost your chances of investing going well (that is, making a decent return), you need to be able to invest your money in the long run - anywhere between 5 to 10 years. So, if you’re looking to have immediate access to your funds for an emergency (aka that gorgeous bag you can’t quite believe is on sale), an investment account is not what you need. It’s generally recommended you have at least 6 months’ worth of your salary squirreled away in a cash savings account before you begin to invest.
Next, understand that investing involves a level of risk. Nobody likes to lose money, but if you’re depending on that investment to make a guaranteed return and can’t afford to lose a dime - proceed with caution.
Now that we’ve outlined the main reasons that could legitimately stand in your way of investing, listen up: putting all your money into a cash savings account may not be a good idea. You might think you’re keeping your money safe, or feel queasy at the thought of the risk that comes with investment. In fact, experts even have a name for this strategy - it’s called “reckless caution”. Why? Because if you don’t invest, inflation may get the best of your money and you may be left with no returns, and might even lose some of it, too. According to the ONS, in the last 10 years alone costs of goods and services have risen by almost 37.6%. Unfortunately, this trend seems to show no signs of abating.
So even if you’re scared by the prospect of investing, it may be the sanest decision you make, both for your future and your wallet.
The best way to shake off the fear of investing is to educate yourself without losing sleep - you don’t have to be an expert before you start investing. Financial institutions make investment sound complicated - and, sure, some aspects of it can be - but the basis of investing is pretty straightforward. You invest in the financial instrument - bonds, stocks or alternative investments - with the goal of putting your money to work and making a return. When you’re buying stocks, you’re buying a small part of a company; if you buy bonds, you are buying their debt. The principle of making money out of these investments is that, as the company grows, your investment in that company will reflect that growth. That really is the the gist of it.
It is also worth remembering that there are different styles of investing, from the very risky to the more balanced and diversified. This is where professional advice can come in handy. Whether you choose a robo-advisor or a human one, make sure you pick a service you’re genuinely comfortably with, and don’t find intimidating.
As a general rule of thumb, here’s a couple of things you need to determine before you begin to invest:
- Your goals. Are you planning to buy a house in 5-10 years time, or do you want to build a pot of money for the kids? Or perhaps, you’re saving for a big purchase?
- What level of risk you are comfortable with.
- Are you financially fit? It makes no sense to start investing if you’re in a lot of debt, or have very little in the way of cash savings.
The bottom line is this: you can always find a myriad excuses for not investing. It seems complex, it’s laden with jargon, it’s also traditionally viewed as a ‘man’s thing’ to do. Whatever your excuse, you need to shift your thinking: think of investing as a smart, necessary strategy for making your money work for you, regardless of your income. Once you see it that way, you’ll feel empowered to take action.
*The value of investments and income from them may go down as well as up and are not guaranteed. You may not get back the amount you invested. You may want to consult your own financial advisor.*
Credit Image: Giphy.