Have you reached a point in life where you are constantly thinking about money? Investing can be intimidating and difficult to comprehend, which is why we have created an “Investing Guide For Beginners.” As a new investor, you will undoubtedly be overwhelmed by the variety of investment options available to you. This guide will assist you in determining the best investing strategy for your specific situation and financial objectives.
What is investing?
Investing means putting cash into an endeavour with the expectation of making a profit. It is not only for “business people” but anyone with money can invest in anything they want. You can invest in stocks, shares, forex currency, funds, peer-to-peer loans, precious metals, or real estate. Investing allows you to accumulate wealth over time by compounding interest.
Why should you invest?
Investing increases the value of your money over time. It is always better to make money work for you rather than sell your time for money.
Most people invest for the three reasons listed below:
(1) Let money work for you
Savings will not help grow your money. Keeping cash in the bank is the worst thing you can do to build wealth because cash does not keep up with inflation and it will lose value over time. Inflation refers to the increase in the prices of goods and services in an economy. Everything will become more expensive than it was a few years ago.
(2) Diversify income
There are no longer any jobs available and layoffs have become the new normal. Your entire livelihood will not be dependent on one employer if you have multiple incomes. This could protect you against potential redundancy or unforeseen emergencies.
(3) Pay off debts
Debt hinders your ability to grow wealth as you can’t invest in your future with the mountain of debt that you haven’t paid. Investing allows you to get out of debt sooner. We recommend that you pay off your high-interest debts first, then use investment returns to pay off your low-interest loans.
Types of investments:
(a) Short & medium-term
Short & medium-term investments are those that will be converted to cash or sold within the first five years. Short-term investments are riskier than long-term investments due to higher rates of fluctuation, but they can be more profitable. Short-term investment can also be used to temporarily secure funds while earning additional returns. It is an excellent way to start investing or to build a diverse portfolio of both long-term and short-term income streams.
For example, peer-to-peer (P2P) lending. You can expect to earn competitively high rates when you invest in personal loans through online peer-to-peer platforms. We connect you with carefully screened borrowers so you can earn interest on personal loans and your investment is spread across multiple borrowers to reduce risk.
A long-term investment is expected to be converted into cash or sold in 5 years. If the market is volatile, you may need to wait even longer which could take up to ten years. When you invest for the long term, you must not panic when a stock’s value falls and avoid selling simply because the market appears to be in trouble. You just have to be patient.
For example, investing in stocks and shares. The stock market is highly volatile and hard to predict. If your financial goals are to save for a vacation or home renovations, stocks are not the way to go.
What is compounding? How does it work?
Compound interest means earning interest income at an ever-accelerating rate. The sooner you start compounding, the more interest you will get. For example, if you save 100 dollars at 15 and earn 10% interest, you’ll have more than 100 times that amount by age 65. To ensure a successful compounding, you must balance the amount of money, interest rate, and time invested.
We hope that this guide will help you to better understand investing strategies. Want to learn more about P2P loans and the potential returns they can provide? Contact us now!