harianfakta.com – Do you wonder what can you do to start investing your money? This article might be a help for you.
A lot of times, many of us face the problem that we have no money when we need it. The reason for that is, we don’t know why we spend money on the stuff we don’t need.
That is why having an investment whether for emergency or other goals is crucial. It provides us the money when we need it.
Each of us has financial goals such as education, health care, buying a home or a car, or going on a vacation. With the investment, you can achieve all those goals.
Moreover, people can solve financial problems such as debt, overspending or impulsive buying.
Some people think that investment as a difficult and complicated concept to master. Others think that it needs a lot of money and many steps to start.
Some even afraid of losing money on it. But those things are not true and don’t have to be that way.
Investment is a financial asset that people buy to get profit in the future or from the margin between selling and buying price. What will actually take you to invest are continual learning, discipline, and courage.
No matter how much money you have, you can begin investing today even with Rp100.000.
[Read: 6 Causes of Impulse Buying and How to Resolve It]
The purpose of this article is to help the reader to be familiar with the basics of investment and gain the confidence to take action to start investing in the right instrument.
The Purpose Of Investment
There are 2 important things to consider before going with the instrument. Determining your financial goals and calculating the amount of money to achieve you want to achieve.
There are short-term and long-term goals of investment.
Long-term goals are funds for college tuition, health, and medical care, emergency, buying a home, car or vacation.
It is a type of capital gain that has a purpose to increase your initial capital. On the other hand, funds for the short-term goals are intended for cash flow (money that regularly flows in and out).
Money from this investment is used to obtain regular income, pay debts, for retirement or financial freedom.
How Much To Start Investing
Now that you have known the investment goals, calculate the total amount and how much to keep for each month or year. You can use Finansialku application to do that quickly.
How To Start Investing
In investment, time is more important than money. The value of money is decreasing over time. You may notice that a cup of coffee today is more expensive than 2 or 3 years ago. It is because of the inflation, the rising of prices.
The earlier you invest, the chance to gain more return is higher than when you invest later. So start investing now.
The price of an investment will go down from time to time because of inflation.
If you are a newbie in investment, a good place to begin is through compound interest. Why you should start in compound interest? When investing for 3 years let’s say you put Rp500.000 and get interested each year for 5%. In the first year, your money is Rp525.000. In the second year, you get Rp551.250. And in the third year, you obtain Rp578.812.
This is the concept of compound interest:
1st year: initial principal + interest = Rp500.000 x 5% = Rp525.000 (a)
2nd year: a x 5% + a = Rp551.250 (b)
3rd year: b x 5% + (b) = Rp578.812
As you can see, interest is applied to the result of your investment in the 1st year and is added again. So, it creates a multiplied effect on your investment. The longer you invest, the higher the return you’ll get especially if you start earlier.
When you put the money for a certain amount of time such as 5 years, you shouldn’t withdraw it during the time because each year the return is multiplied.
The maximum result of compound interest depends on the amount of money, interest and period of investment.
The earlier the better and the higher the capital and interest, the higher the return.
You probably are a business owner who’s looking for ways to keep business activities run well, or a staff in tech firm who pursue passive income streams or a housewife who is preparing for a family vacation in Europe.
Then, you will need money to make those goals come true and the best way is through investment.
[Read: How To Make Money For Every Profession Quickly, Check This Out!]
The next step is to choose the tools/instrument. It is like picking up a vehicle to get you to the place you want to be.
There are many instruments today with their own risk. Investment products include real assets (real estate, precious metals, luxury asset, business) and paper assets such as cash, stock, and cryptocurrencies.
Principles In Investing
Hopefully, you could decide the proper instrument to fulfill your financial goals. Besides having specific and clear financial goals, being informed about the instrument is also important.
In his book Intelligent Investor, Benjamin Graham argued that successful investment happens when people have a sound intellectual framework on decision making, ability to keep emotions from corroding that framework.
He also mentioned that one needs to avoid deciding on investment according to superstition, guesswork or arcane.
And know how to minimize and protect your investment from the risk of loss, high volatility, or crisis in a financial market.
The investment could serve the need of people to fulfill their financial goals. It is not a difficult or complicated thing to start. By planning specific goals, choosing the right instrument, and being disciplined, you could grow your investment.
Various instruments fit with your financial purposes. Learn and apply the principles of investment to get the best result.
After reading this article, hopefully, your view on investment is changed and you could bravely take actionable steps to invest even if you have little money.
If you find this article helpful, please share with those who need investment for their financial goals.