Why Is Investing Necessary?

Like many others, I didn’t see the point in investing until a few months ago, so I’m writing this post to encourage investing. I remember that I was only 16 when I was first fascinated by stocks, bonds and derivatives, but I never put a single cent into investing until recently. Looking back, I have wasted 6 precious years of compounding returns, which could mean an additional $1,300 per $1000 invested, if the rate of return I got was 15% per annum.

Now that I have invested my first sum of money into Mutual Funds, my only regret was not starting earlier. Of course, there are risks involved and there are times when I felt fearful that my fund prices will drop, but I have gotten over that phase now. I’m now pretty immune to price movements, since I know that I’m investing for the long-term. I would just say that the earlier you start, the more financial literate you become, because nothing beats hands-on experience. For me, I procrastinated for six long years, when I could have easily gotten my mother to set up an account for me. Therefore, I hope that you won’t make the same mistake as me.

Think about it: Do you know any millionaires around that do not invest their money, whether in real estate, stocks or their businesses? With that said, I think the common barrier to investing for poor folks like me is the belief that we have too little money and the returns won’t be worth our efforts. However, I urge everyone to start thinking from another perspective: If we can’t invest a small sum of money, what makes it possible for us to invest a larger sum of money in future? Even if we are only investing a small sum of money, the knowledge we gain and the millionaire habits that we develop in the process makes it all worthwhile.

With that said, I’m not expecting you to immediately throw your money into an investment right away. I would advise non-investors to seek knowledge, but give yourself a date to start investing and learn as much about investments as you can within the time given. When the date comes, depending on how much you have learnt, pick an instrument that will give you maximum returns with your level of financial literacy. If you really have no time to pick up financial knowledge, then perhaps at least place some of your money in fixed deposits, although it’s only around 3% interest. I believe that will at least open up your mindset that money need not only be kept in the bank.

I believe that once you start seeing some returns, you will want to pursue higher returns and become more financial literate in the process. Just take note that greed can be an ugly monster and rob us of our rational thinking, causing us to make irrational decisions at times. It’s necessary to start investing as soon as possible, but it’s even more important to preserve your capital. The last thing you want is to suffer a permanent scar because of a previous rash decision that made you fear investing.

I will blog more about investing in the coming weeks, because I really think that it’s really important for everyone. It helps the rich to become richer and it gives the poor a chance to become rich as well. Start to play around with the notion of delayed gratification and locking your money for the longer-term through investing. In my next post, I’ll introduce the common financial instruments. Stay tuned…