Investing for the future is an essential and integral part of saving. After all, what is the point in saving if your dollars are just going to be resting in a lock box or even a low interest savings account? By the time you use these savings, the money saved over the past twenty or thirty years will not amount to much in the present because of inflation.
The fact remains that unless your savings are invested in the right way, they will not give you much financial security in the future. Investing your savings in the proper instruments and avenues multiplies them considerably. Here is some advice that beginner investors can use:
The earlier you start saving the better your chances of a secure financial future are. Understanding the magic of compounding is a good first step to convince yourself to start early. Compounding not only allows your initial investment to grow but also reinvests the interest earned, generating a significant amount in returns. In this manner, every single cent in your investment is constantly working to give you better returns with each passing year. Evidently, the sooner you start saving, the more the number of years over which your investment has the chance to grow.
Knowledge is Power
Avoid investing on hot tips from friends and relatives. Most often such tips result in losses because there really is no perfect way to accurately predict which way the economy will move. Investing is an art that requires a thorough knowledge of the markets and quite a bit of research on the latest stock, bond, and currency market trends. Educate yourself about various investing options and about the economy in general. This way you will have a basic foundation that you can use to judge the soundness of various investment avenues.
Avoid Treasure Hunting
There have been well publicized and spectacular success stories in the investment world, but it is advisable not to be lured by ‘get rich quick’ investments. Treasure hunting or looking for investments that promise quick and huge returns often ends in big losses, especially if you invested a large chunk of your savings. The market can never be predicted with complete accuracy and this makes it very unlikely for treasure hunts to succeed.
It is best to objectively weigh both risks and returns of any investment you wish to make. Where risk is high, reduce your exposure and where returns are assured, invest generously.