When I was a fresh graduate, I never thought about how to invest my money. I am a good saver but never an investor.
Things have changed when I became buried in debt when I was 23. A friend who was a financial advisor talked and offered me an investment in which I almost put all of my savings on that instrument. Later on, I regretted my decision because that investment wasn’t fit with my goals and aspirations.
Though it helped me a lot to open my eyes to the possibility that there are more investment instruments out there, but which one should I choose?
What is Investing?
But before that, what is investing?
For some people, they thought that investing is a gamble, but Investopedia.com says, investing is the act of committing money or capital to an endeavor (a business project, real estate, etc.), expecting of getting an additional income or profit.
People who invest their money have two primary reasons; to grow their money and to have an additional income.
To grow your money, you have to make it work hard for you and putting your money into a savings account couldn’t do that because our taxes are increasing thus instead it will grow over time, its value will decrease.
Before you invest, consider the tips below:
Before You Invest
Before you invest, you should set a goal first and commit to achieving it. If you haven’t set your goals, please read this first.
And also, do not invest in something you do not know.
Then, you should save by now. 3 to 6 months worth of your salary will go into your savings account. Never put all your money into an investment. If you don’t know how to save yet, this is how to save money.
Why do you need to have savings first before investing? Because investing has a lot of risks. You will either lose your money or grow it. In such an event you will lose it because of several factors; you don’t have to worry about it and pulled it out like most people do.
Now, given that you have savings for emergency and have a goal already, then you need to determine what kind of investor you should be.
What Kind of Investor are You?
There are four kinds of investors; the conservative, the balanced, the moderate, and the aggressive one. Which one are you? Here is a simple test: https://www.dhennespiritu.com/what-type-of-investor-are-you/
Once you have the result, you can now invest depending on the risk you can handle and the goal you have for your finances. Now, where to invest and how to invest my money?
Where to Invest?
There are different investment instruments where you can put your money to make it work hard for you.
1. Investment-linked Insurance.
Some people called it as VUL (Variable Universal Life). It is also as an investment but known as an insurance policy. It has the component of savings, investment, and life insurance. Most financial advisors offered this product as an investment.
There are also pros and cons for this one and will invite a friend to write it on the next blog.
2. Mutual Funds.
Mutual funds are a great way to grow your money as you don’t have to study or pick a company where you should put your money. It can also be a combination of stocks, bonds, and money market.
It is a pool of money collected from investors for the purpose of investing it into different instruments like bonds, securities, money markets, and stocks.
And then there is a fund manager who will manage the fund and do the work for you.
A bond is a form of a fixed-income investment wherein your money will fund an entity or a company project or government for a definite period with an interest rate.
For example, a government has a project and they need to tap investors for funding. As an investor, I will lend my money to the government and put an interest rate on it. The interest will return together with the capital after a period.
I have this kind of investment already wherein I will expect my money to return with the interest rate after 10 years. So far this is a low-risk investment but also low returns.
A stock is a security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.
A stock will earn you the right to become a shareholder of the company, thus you also earn a fraction of the company earnings.
For me, investing in the stock market is a great way to make your money work hard for you. The stock market is a place wherein investors can buy stocks/shares of a company. Once you become an investor in a company, the way you think about the company will never be the same.
And lastly, I know you heard about it already:
If you have heard about Bitcoin, Ethereum, Ripple and other altcoins, you may wonder where it came from? Watch this video first:
Cryptocurrency works like a digital currency and unlike any other investment, Cryptocurrency can only be accessible on the internet. It works as a medium of exchange with a purpose of decentralizing money so the banks cannot even manage it.
Most economist and investors are against it. There were no guaranteed returns in this kind of instrument. You cannot invest in this one for the long-term for now.
As an investor, I am not against with this instrument. To be honest, I am also investing in this, not by buying the coins using my cash but investing in machines that can mine a coin. But that’s enough for now, I will write a separate article how to do it at least on my own experience.
Now, how to put your money in this investment? That will be a long lecture and I promise to write how to invest on that instruments one by one on my next article.
Disclaimer: If you own the photos, please leave a message and will credit it to you.
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