What Is Investing?
What is investing? Put simply, investing is putting your money somewhere it will hopefully achieve a profit. Please don’t think that investing is the preserve of the wealthy. Putting a pound into a savings account is investing. No matter how much or how little money you have, investing can increase it. Yes, it sounds pretty boring and it’s not as much fun as spending money. However, what we’re talking about here is free money so stick with me for a moment!
Let’s say you grab yourself a skinny latte on the way to work every day. That’s actually about £50 per month! If you invested that instead, over 10 years, not only would you save £6,000 on coffee, you could generate £4,000 in profit! Over 20 years you would save £12,000 and could generate £26,000 profit. £38,000 for not having a skinny latte every day! That’s just one coffee, now consider investing a larger amount or a longer period of time. If you saved £100 a month for 30 years, you would have invested £36,000 of your money in total but you could now have as much as £226,000. Not so boring now, is it?
Time Is Key
With investing, time is much more important than the amount. Let me illustrate that statement. Let’s say you want to end up with £100,000 in total.
But if you saved just £45 a month for 30 years you would have only paid £16,000 but could have made £84,000 profit = £100,000 (approx 525% profit)
This is because of compounding, profit on your profits, over and over again, growing your profit exponentially.
The above figures are all based on 10% growth per year which is achievable in investing. It is not achievable in standard savings accounts. You have to invest a lot wiser and there are risks involved but these can be managed to a relatively safe level.