why should you invest ?
investing make your money grow in value and helps you to beat inflation.
investing the amount you spend for a single pizza every month over a really long time will generate such a wealth for you which you can't even imagine
So why invest for long time when you can spent the money now and enjoy your life ? Because life always isn't Sun shines and Rainbows , some time ( Most probably every now and then ) Life will make you suffer a lot and if that's a form of financial suffering your assets like the thing you invested in will help you ,It will give you peace of mind that your investments have gotten your back if your financial situation starts to go down hill
Let me tell you the the different types of investing through a story
Omar and Nadia were roommates, both with some extra cash saved up. Omar, a big foodie, wanted the latest high-tech grill for their balcony. Nadia, an aspiring filmmaker, dreamed of taking a class at a prestigious film school in a year. Their savings goals led them down different investment paths.
Omar's Grilling Goals: Short-Term Investing
Omar opted for a short-term investment. Short-term means you need the money relatively soon, like within a few months or a year or two. Imagine saving up for a concert ticket or a weekend getaway.
Omar chose a high-yield savings account. Think of it as a safe that's easy to access, but it doesn't have fancy locks or alarms. The benefit? Security and easy access. The trade-off? Not much growth. The money sits there, earning a small amount of interest, but it's guaranteed to be there when Omar needs it to sizzle up some burgers.
Nadia's Big Screen Dreams: Long-Term Investing
Nadia, on the other hand, was in for the long haul. Film school was a year away, so she decided on a long-term investment. Long-term means saving for something far off, like a house, retirement, or, in Nadia's case, an amazing learning experience.
Nadia looked into mutual funds. Imagine these as baskets filled with different investments like stocks and bonds. Professionals manage these baskets, aiming for growth over time. The benefit? The potential for higher returns than a savings account. The trade-off? There's a chance the value might go down in the short term, but historically, over long periods, the market tends to trend upwards.
The Results
A few months later, Omar happily fired up his new grill. Nadia had to wait longer, but guess what? Her long-term investment paid off! The money in the mutual fund grew slightly, and she had enough not just for the film school class, but maybe even an extra lens for her camera.
So, remember, just like Omar and Nadia, different goals need different investment approaches. Short-term for immediate needs, and long-term for those future dreams that get a boost from potentially higher growth!
How to invest ?
Let's say you now know what is investing and what are the types of investing , now it's a pretty normal to think how will i find money to invest when i can barely have any money left at the end of the month?
its a pretty fair question to ask . So Let me tell you a secret . it's a simple mindset shift but it can really change your life . What do you do when you get some money let's say in the form of a salary that you get paid monthly . I will say most of you people would first set aside the money to pay the bills and spend the rest of the money as much as possible and if any thing remains you even think about investing but you need to do the reverse of this you need to put a certain amount of money into what ever you are investing into, use the rest of the money to pay the necessary bills and spent the rest .this way you can be confident that you have done something that your future self would appreciate
Now at first the investing amount would be small and may or may not generate enough returns , But remember once you start to do this process over and over again it starts to become a habit and it becomes automatic that you save some amount of money that you Received irrespective of it's source once Time passes you will have acquired enough knowledge to know when and where to invest to get the maximum returns and also your earning would also be increased as you gain experience and you would be investing more money and the discipline you have acquired will help you remain in the gain for a long time\
Mindset
once a dollar goes into your investment never let it come out , because now your money can work for you 24 hours a day for generations , Treat your money as your employee and you as the employer .employee works to make the employer rich , use the money that the employee makes you to purchase the luxury you want
-Rich dad poor Dad
what are the different ways in which you can start investing now
Stocks
see it as owning a piece of a company, just a fraction of it . as the value of the company goes up the value of your stock also goes up . or lets say the company has made huge profits in this quarter of the years and decides to give some of the profits to the share holders as dividend returns . these are the two major ways in which stocks pay you
Bonds
these are as the name suggest Bonds between you and the government or a corporate company , you essentially give loan to government or the company for a fixed interest . so you get a fixed amount into you bank account irrespective of how the market is performing
Mutual funds
these are a basket of stocks managed by a fund houses , unlike us they know what they are doing and they make us more returns by managing our money and they charge some fees for it , it is essentially safer than putting all your money into one stock hoping it will make you a millionaire
Index Funds
they are also like mutual funds but instead of picking the stocks that the fund house like index funds tracks a set of stocks in the index (leader board of the stocks ) , it's like putting money on the winning players
Generally mutual funds and index funds are the better option for a new comer into the the world of investing as it is much more safer than picking a stock on your own because it requires high level of analysis and skill to spot the right stock at the right time
I have only scratched the surface , now it's up to you to go explore . These are not financial advise i am just sharing the path i followed