At some point in your life, you probably will have some money saved up and will start thinking, "I probably should invest this into something." You can't live in this modern age and be deaf to the oft-repeated advice of the way that leads to financial freedom. Save and Invest. To be honest, that advice is solid. If you are going to be free financially, and free early, you are going to have to diversify your income, or at least find a way of using money to make more money. Money is simply an asset, but a depreciating asset, in other words, as a result of inflation, your money will lose value steadily and progressively.
Here's what I mean. If you dug into the ground and hid $1000 way back in 1960, and then dug it up in 2016, you'd have lost about $7,000. Why? The answer is inflation. Generally, money loses value the longer it is kept. What does this mean for you? It means that you'll need more money in the future than you'll need today, even if your expenses do not increase.
The rate at which your money loses value depends on the inflation rate, and since 2000, the inflation rate annually is between 1% and 4%. That means that your money is losing value by about 1% to 4% every year. This is the issue with many 'safe' investments options. The interest rate will probably earn you enough for your money to retain the same value. In 2018, for instance, the inflation rate in the United States was 2.4%, and the best 'safe' investment you'd probably have found online was a 6-year CD from a commercial bank, Amerant Bank who was offering 2.7% per year. Plus, there's no assurance that the inflation rate wouldn't have increased to say 3% or even more.
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Look at it this way, if you've saved up enough money to buy a Toyota, then keep the money under your mattress for about 20 or 30 years, then when you take it out, it'll probably be enough to buy a bicycle. Invest it with your local bank In a Certificate of Deposit, and then, in 30 years, it'll still be able to buy you a Toyota. Invest in the stock market, however, and you can probably get a Maserati or something fancier.
That is why investing is a no-brainer. While saving is a good strategy for managing your money in the short-term, you need a plan for how you'll invest in the long term.
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- What is the stock market?
- Terms that it is important to know
- Master the mystic arts
- Tools for profitable trading
- When is it time to sell for a profit?
- Value investing
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- Why you should consider short selling stocks
- Identifying and picking the right growth stocks
- The basics of fundamental investing
- Stock scanning and building a watch list
- 10 common mistakes ... AND MORE!!!
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