I have a strong passion for cryptocurrency and investments. I have over 3 years worth of experience in it. I am not a financial advisor.
Better Now Than Never
Before we truly answer the question of whether you should start investing or not. There is a saying out there that sums it up.
Idle money is wasted money.
It is always better to have some form of investment rather than just letting your money sit in the bank. Sure, by not investing you will incur close to no risks. However, your money will not be able to fight against inflation if you decide not to invest.
Let’s get into greater detail on why we should start investing.
What is the definition of an investment?
Investopedia defines it as follows:
An investment is an asset or item acquired with the goal of generating income or appreciation.
I don’t have my own definition of investment as mine is similar to what is defined above. There are some people who confuse investment with gambling. Both are similar in the sense that you put in up front cash for an asset and then hope for greater returns at the end of the day.
Let’s quickly correct this incorrect frame of thinking.
When you do investments, you put in money with the company because you believe in the mission and vision of that company. You believe in the future that it is able to bring. This is why, it is only advisable to invest in companies after you have performed your own thorough research.
When you gamble In companies, you simply listen to the advise of the internet without performing your own research and invest your money in that company. Often times, this will result in the user losing money as no prior research was conducted.
When it comes to investing, I always advise my friends to do their own research. Sure, you can heed advise from somebody more experienced but the decision has to come from you.
Why Invest Instead Of Saving Money?
I get this question a lot from those unfamiliar with investments.
Why should we invest? Why not save the money in a bank?
To answer this question, I will give them examples. As I’m a Singaporean, the examples I give will be relevant in Singapore’s context.
50 years ago, how much did 1 packet of Chicken Rice cost? It can range anywhere from 1 - 20 cents. How much does 1 packet of Chicken Rice cost in 2021? Average about $3.50. So, if you were to not buy the packet of chicken rice 50 years ago and save that $0.20, you will not be able to afford a chicken rice today because you will be short of $3.30.
Yes, that’s right. It’s because of inflation. Living expenses continuously increase. Bank do pay interests but let’s be honest here, the interest rates are nearly negligible. Somewhere like 0.05% interest per year.
With cost of living increasing and your savings not increasing proportionately, you will soon realise there will be a problem. You will never be able to beat inflation this way. Yes, you could potentially survive purely based on savings but why take this risk?
Why not simply set aside a percentage of your salary into investments. Think of investments as your retirement plan.
Again, you should not invest a huge portion of your salary into investments. For me personally, I invest about 40% of my salary into investments. Another 40% goes into savings and the rest for my monthly expenditures. Your percentage will vary depending on the responsibilities that you have currently. For those with kids, I will think anywhere from 10% - 20% into investments will be a good start.
Grow Your Wealth Through Investing
When Is A Good Time To Start Investing?
For me personally, the best time to start investing is now. Some seasoned investors, they like to time the market. Waiting for the stock they are eyeing for to drop below a certain level and then buying in.
This is a good way to maximise your profits but how do we know when is the lowest the stock will go during that period? It takes practice and you will have to be able to read the market charts.
Dollar Cost Averaging
This is why I recommend people to start off with Dollar Cost Averaging or DCA in short. Timing the market may not be everyone’s cup of tea. Invest religiously every month and you should be safe. So certain times, you will get in the market when it’s high and certain times you will get in when it’s low. It will average itself out eventually.
You should start investing when you are younger. Why? Well, simply because you have fewer responsibilities. Therefore you will be able to take more risks. Also, the longer you invest in, the higher the potential for you take back greater returns.
Should I Invest?
With all that said and done. Back to the topic of whether should you start investing or not. The answer is yes. Make it a habit to set aside a certain sum every month into investments. Your future self will thank you.
So, have you started your investment journey yet?
If you enjoyed my article, feel free to buy me a cup of coffee!
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2021 Muhammad Shairazi
Muhammad Shairazi (author) from Singapore on February 16, 2021:
Umesh Chandra Bhatt from Kharghar, Navi Mumbai, India on February 16, 2021: