How to Stop Stressing Out About MoneyJuly 11, 2018
We are Just Getting Started!August 18, 2018
THE MOST MAGICAL WORD IN FINANCE
Investing can be overwhelming. Whenever people start talking about investments, they seem to adopt a special dialect of English that only the initiated few are meant to understand. ETFs, ETNs, CDOs, and QQQs, active and passive strategies, index funds and hedge funds – the mere mortals are left scratching their heads. Leave alone the fact that just plain stocks and bonds can be mind-boggling no wonder so many of us do not come near the stock market!
And yet, it is not as complicated as it seems. Despite the proliferation of investment products out there that claim to deliver outsized returns because their creators have found some “secret formula” to beat the market, sticking to a few simple, tried-and-true principles will serve you well in the stock market. The two principles I recommend to every Investress are: 1) invest early and often, and 2) keep your money invested to let it grow.
The most magical word of investing is TIME. Time is money in investments for a regular person trying to save for regular things and live a normal life. It is not market timing or short-term opportunities in the market because those serve the interests of a different investor who is most probably not us. Time will do its magic in the stock market because as long as the world moves forward, human kind will create value over time and you will participate in this value.
You do not have to look far to see the proof of the progress we consistently make as a species. The recent changes in technology alone have been nothing short of amazing. Throughout history, inventors have invented and pushed the world forward. But they have not been alone. Their endeavors have been financed by capital provided by those who have the means to invest in new ideas. The stock market is at the head of this system and if you invest, you will see return on your investments over time. The stock market is not always a smooth ride, but it has always rewarded the patient believer in its value. (This article does not deal with what to invest in- we will look at picking the right investments in another post.)
"... as long as the world moves forward, human kind will create value over time and you will participate in this value."
The topic of investing early and often is very relevant to women. It seems that women face obstacles at every stage of their lives when it comes to investing. We graduate from college with debt, get entry-level jobs and share apartments with roommates. Budgets are tight and temptations are many. There is so much to choose from – Uber, Soul Cycle, designer brands. Who has the money to invest! Our 401(K) go unfunded and we never learn to look at stock market charts. As we get older and start a family, we may leave our jobs or have too many expenses and not have extra cash to put away. Before you know it, it’s time to borrow for college and pay down the mortgage. Finally, with the retirement looming large and the health care costs rising, investing seems like a very distant afterthought.
The truth is, there is no perfect time to start investing. The best time to invest is NOW.
If you are young and single and just starting your career, you need to open an investment account right away. You want your money to start working for you immediately. Years down the road if you decide to leave your job to start a family, you will put your career on hold, but your money will continue to grow as you change diapers and drive the kids to the playground. It will be very rewarding to know that your investment account will grow even if you do not contribute anything to it for a while. When you are ready to jump back in, you will be pleasantly surprised how much more you have than when you started. And that is a very good feeling!
HOW CAN I MAKE GOOD CHOICES ON A BUDGET?
If you are juggling a career and kids and struggling to keep up, set up an automatic withdrawal of a small amount from your paycheck before you even see it in your bank account. Make yourself believe that the money was not there for you to spend in the first place. As you get promotions and raises, commit to putting away part of that additional money before you spend it on your everyday expenses. Your kids won’t know the difference, but your financial future will thank you. When the kids leave the nest, you may have more breathing room and start planning more vacations and leisure activities. Or perhaps you still need to repay the debt you took on to pay for college. Whatever the case may be, pay yourself first. We live longer and longer and need our resources to last. It is never too late to start putting money away because you will have years to reap benefits even if you start later in life. Regardless of your age, income or family situation, open an investment account and start putting something (anything!) away. The amount is irrelevant – start with a $50 if you can’t do more. Use the magic of time to your full advantage to make your dreams come true.