You probably know that money becomes worth less over time. That has been the case ever since global currencies were removed from the “gold standard” and converted to “fiat” money.
Many of us save some of our earnings to build a nest egg for the future, but without some careful planning, the attributes of a fiat currency will reduce its value over time. That’s why we need to look for ways to make our money work as hard as we do.
Buying products early can be one way to do this since you can lock in today’s prices for the future, but there’s only so much rice or pasta that you can keep at home, so other methods are required.
Investing is the go-to option for many people looking to beat negative economic factors and grow their wealth, but it is a notoriously difficult subject to understand if you’re not working in finance. This needn’t be the case, though, as things can be very simple provided you’re willing to do a little reading and spend some time upfront.
If you are, here are some tips to get you started in investing.
Don’t Think You Need to Be a Day Trader
If you watch videos on YouTube or you’ve spent any time scrolling through TikTok or Instagram, you’ll almost certainly have been bombarded with videos of people telling you which companies they are certain are “going to the moon” and ads for people offering to show you how to pick incredible stocks.
In almost all of these, they suggest that you should be buying and selling stocks on a regular basis. This isn’t actually the case though and, unless you’re prepared to make it a full-time career, you almost certainly won’t have the knowledge, experience, or resources to do this effectively.
What’s more, trading usually incurs fees. Even if you use a broker that doesn’t explicitly charge for transacting, you’ll lose some of your cash on the bid-ask spread. Therefore, the more you trade, the more you pay, which will be a drag on your investment performance over time.
Compare Fees and Other Stats
It’s important to always read about and understand what you’re buying. Not just in investing either – it’s a good rule for life in general. When you’re buying insurance, it’s important to check that the policy meets your needs and you are actually eligible for a payout if you ever make a claim.
The same applies to video slot games. When playing this popular casino option, you’re presented with many different titles, each with its own theme, bonus features, and stats. Understanding these can help you choose the one that’s right for you, and a good place to start is the Return to Player rate. The meaning of RTP is the theoretical average amount you can expect to have returned from your total wagers, therefore, you’ll want to find games with a higher percentage.
In investing, the annual “ongoing charge” that funds and brokers charge is similar to the RTP, but instead of a high percentage, you’ll want to find ones that are as low as possible. While fees may seem tiny, even a small increase in costs will require a much bigger increase in returns to offset the difference.
Focus on Passive Investing and Diversify
There are two main ways to invest – actively and passively. Active investing involves conducting research and analysing information about different companies and assets, whereas passive investing involves practically no work.
Big names in finance like Warren Buffett are big advocates of passive investing for most members of the public as it’s easier and gives protection against general market fluctuations.
Buffett typically advises investors to buy shares in index funds, such as those that track the US S&P 500. In doing so, they can diversify their holdings across 500 companies and most key industries while only purchasing a single asset.
Doing this regularly also allows you to take advantage of “dollar-cost averaging” which means you don’t have to try to predict when stock prices are likely to go up or down.
Of course, when investing, you need to do your own research to be sure any particular strategy or product is right for you, but these basic tips are regularly put forward by respected names in the industry, so they’re a good place to begin your journey.