And this is a completely logical rationale. After all, investing increases our capital. This means that by investing wisely, we become richer.
One Japanese entrepreneur used the five-whys strategy to get to the bottom of the true nature of things. He also asked himself this question consistently as he planned his company’s strategy. And years later he led her to great success.
Ask yourself – why do you want to become richer? After all, it is for this that you are planning to start investing.
It is unlikely that anyone intends to simply accumulate a chest of gold. The possession of gold and diamonds does not bring happiness in and of itself.
The point is different. Each person has some desires and aspirations. And to realize most of these desires, we need money. Where can I get them?
Investing also gives you the opportunity to accumulate the necessary funds. Then you will achieve what is important to you. This will make you a happy person.
Reach your important goals
Most likely – this is what you need if you plan to start investing. Maybe you just haven’t formulated your investment goal in this way.
If we look into the future, then each person has a number of life goals that need to be achieved. And in most cases, a person needs money to achieve these goals.
Investing is exactly what allows you to create the funds you need. What follows from this?
Before you start investing, understand what your own, individual financial goals are. Why is it worth doing?
Because investing is just a way to achieve what is important to you. Likewise, a car is a way to get to your destination.
However, starting the engine in our car, we have already decided where we need to go. After all, no one travels the streets aimlessly, just like that. Going on the road – we set ourselves a goal.
It’s the same with investing. Before you start investing – understand where “you are going”, what is your goal. When we talk about personal financial planning, large financial tasks are usually subject to discussion and subsequent planning. Which require significant savings for their solution.
What can it be? Therefore, a logical question arises – what is the best thing to do if the family has free funds. Is it worth investing them – or partially repay the existing loans with this money?
Most likely – you should send money to pay off existing loans. Why?
Because the interest rate on your loan is quite high. And there is no guarantee that when investing, you will receive a higher return on investment. But simply by partially repaying the loan, you will save interest for yourself, which you will not need to pay to the bank.
In fact, you will earn the funds that you would give to the bank in the form of interest. You are guaranteed to receive this profit by paying off debts ahead of schedule. And there are no such guarantees in investments.
Therefore, if you have loans, they should be repaid quickly. In most cases, this will be more profitable for you than investing free funds. This will be your first beginner investment. Very reasonable and profitable.
One caveat is really worth making here. And it concerns mortgage loans.
Many families have to take out a mortgage to buy an apartment or house. This is a very large loan that families usually pay back for decades. And if you postpone the start of investing until the full repayment of the mortgage, then you may not have enough time to create personal capital.
Therefore, it is worth paying off all your loans ahead of schedule, in addition to the mortgage. It is quite possible to do this at the expense of your current income, planning your personal budget wisely. In addition, the rate on small loans is usually noticeably higher than the mortgage rate – therefore, it will be most profitable to repay small loans early.
If your income has grown significantly and allows you to repay your mortgage ahead of schedule, do it. So you bring closer the day of liberation from debt bondage – and save the funds that you would give to the bank for using the loan.
Building your liquid reserve
Surely many people know that the word “crisis” in the Chinese language consists of two characters. Which are called “danger” and “opportunity”. What does this have to do with the topic of the article about investing for beginners?
As an investor, you will surely face crises in the financial markets. This is a danger. But at the same time, for the discerning investor, this is a time of opportunity.
Indeed, in times of crisis, many assets fall sharply in value. And this is a great time to shop. Because you can buy quality securities at a huge discount.
But for this you need money. Where to get them from?
The answer is simple – you need an “emergency reserve” cash. This is cash, or assets that can be turned into cash very quickly and without high costs.
This reserve is also called the financial pod.