We often understand that saving money creates wealth or that keeping our money in a bank increases our wealth. Neither of those is correct. Saving money is setting aside money that you can have easy access to for the future. Keeping money in a bank is safe, but typically in a savings account, you’ll make less return over a period of time and you can struggle to keep up with inflation rates.
The best way to increase wealth is to invest. When you invest your money into something, your money starts to work to earn more money, and more. This is known as compound growth. Eventually, investing allows your assets to grow over and above the rate of inflation.
There’s nothing like it’s too early to start investing, and the sooner you do, the better. This gives time for your invested money to take advantage of compound growth. You might be young and still not thinking ahead with the financial obligations you already have now, but delaying will decrease the potential of what you can gain since we mentioned that money takes time to make more money. And needless to mention, time, and where to put your investment are the two most important factors to consider.
Here are the three most common areas where people invest, each with its advantages and drawbacks that we’ll touch upon.
People invest in stocks because you don’t have to have a huge capital to invest in a small or emerging company. It’s arguably the investment you can make the most money in, but also lose the most money. Unlike other investments, where you can regain some of what you lost, you cannot always do that in stocks. When getting involved in the stock market, you have to do your homework diligently and decide which companies are worth your investment.
Investing in the yellow metal might also be favored for several reasons. One of those reasons is that anytime the dollar falls, the price of gold rises. It’s often seen as a hedge against inflationary conditions. Gold is also easy and quick to liquidate when cash is needed. Nonetheless, it too can be prone to economic conditions. This makes it important to keep up with the current gold price as it can change daily, yet does propose the least risk. After doing this, you will have less to worry about.
One of the biggest advantages of real estate is that you can generate from it a passive income, and there are several ways to invest in real estate. It’s a tangible asset that can always be monetized through renting regardless of financial market conditions. Yet, of its drawbacks is often needed a loan to actually invest, and not all investors meet eligibility requirements. Securing financing for an investment property is a huge obstacle to take note of unless you already have the money.
If you want to maintain and actually improve your lifestyle and not worry about your financial future, then don’t waste more time by not investing. These were the common ways people invest, and each one could give you that lifestyle you want and want to maintain over the years if done right.