How to Make Your Money Earn for You!

However, with 2020 approaching, one thing to add to your resolutions list for the new year is – “this year I am going to make my money grow.” 

Once you become an investor, you will use your money to acquire things that offer great returns through at least one of the following:

• Dividends and Interest
• Cash flow
• Appreciation of value from an asset in your investment portfolio

When you are on the journey to becoming an investor, you will learn to dedicate your resources to things that offer you the potential for great returns. 

In this digital era, with the advancement of technology, investments in many forms can be made easily on your phone. All you need to have is – money, of course! 

Here are the basics of how to make your money earn for you, in a wise manner! 

Why Should You Invest?

An investment allows you to grow your money by a significant amount over the course of time because of the compound returns earned. 

The power of compounding is a magical potion for investors. For instance, you have made a 1 AED investment in Dubai, with this magical potion your 1 AED can be converted into a multiple number figure over time. 

When Should You Invest?

The ideal time to start your investing journey is when you start to earn a stable income. This is because of a simple reason – the earlier you step in, the broader is your time horizon – the more time you have to be in the market, the higher are the compound returns. In case the market starts to go down, you also have enough time to recoup your losses. 

With that being said, it is never too late to start investing. Regardless of your age, the best time to start investing is now! 

Investment in most people sounds intimidating. This is mainly because of the potential risk for losses exists. However, what we often overlook is that along with the risk, there is potential for bigger gains. 

Any first step in life requires a lot of guts and courage. Investing for the first time can be scary and a big step, especially since it involves your hard-earned money. Here is some advice for the first-time investors out there: 

The good thing about starting to invest early is that you are likely to invest in long term investment plans like a retirement account. These investments are not very risky when compared to stock trading that is done by people who do not understand the concept fully. 

Always remember – investing can be a risky step, but it is good to take that risk. This is because not investing is likely to cost you more money than what you would lose on a bad investment. 

What Should You Invest In?

The best rule to follow while starting your investing journey is – keep it as simple as possible. To keep your investment portfolio well balance it is essential to create broad diversification. The key to diversification is to hold assets in your portfolio that are negatively correlated. 

The essential factor involved in being a successful investor is beyond the funds and stocks you choose. It depends on:

• Proper Asset Allocation: Asset allocation is the overall mix of stocks, bonds, and cash in your investment portfolio.
• Making and Sticking to a Proper Investment Plan: Sticking to a plan helps in overcoming your emotions. Sometimes, emotions can cause an investor to make poor decisions such as selling at the bottom of market cash. 

Mutual Funds

A mutual fund is a fund that is managed professionally by a fund manager that pools the money of the investors. The fund manager then spreads this pool of money across by purchasing different securities. 

If you are new to the investing world it is a good idea to start with investing in mutual funds or ETFs (exchange-traded funds) rather than individual bonds or stocks. This is because such funds allow you to invest in a wide portfolio of bonds and stocks in just one transaction and you do not have to trade them all yourself. 

Not only are mutual funds a safe investment, but they are also way less costly to invest. The fee involved is just a trading commission at the maximum. Whereas, while trading in individual stocks and bonds you will have to pay commission on every stock or bond you buy. 

Bonds

There are a variety of bonds available in the market – municipal, corporate, and treasury, and all of them are an excellent way to leverage your investment against the success of other companies. Bonds are a debt investment that raises capital for others.

They help in raising finance for new companies and even the government. While there is no investment that doesn’t expose you to risk, government bonds are as safe as one investment can get. 

As a first-time investor, it is also important to know when you require financial advice. Financial advice can be gained from online platforms or a face-to-face advisor. It is best to evaluate your investment needs and opt for an option that suits your requirements. 

The Bottom Line

These are the basic steps to take a dip in the pool of investing. Once you have a grip on these ideas, you can start with your investment journey.