Learn why the ‘how’ of investing is less important than the reasons to start investing now and how an investment plan can help you achieve financial freedom
Oh no, another article on why you should start investing! Some do a good job at outlining the reasons but miss one of the most important reasons to start investing and the urgency to start now.
After missing out on the biggest reason to start investing, many articles wander off into overly complicated strategies on how to invest. Strategies that are ultimately going to lose you money and sour you on investing before you get a chance to see the benefits.
Don’t miss out on your chance for financial freedom through investing and don’t get hung up on the ‘how’ of investing.
Why Everyone Should Start Investing
I understand that it’s not always easy to put money aside after all your bills are paid. I’ve been there, living paycheck to paycheck. It’s easy to talk about investing and saving when you’ve got extra income, it’s not as easy when you’re trying to support a family on limited means.
We talked about squeezing a little extra out of your budget and finding out how to prioritize saving in our free budgeting worksheet. Even if you’re only able to save $50 a month, it’s hugely important that you get started now.
The first reason to start investing is the power of compound interest which is just a technical term for making money off your money. Start investing in your 20s and you’ll be earning interest on that money for decades as well as earning interest off your interest. The graphic below shows the power of investing early and growth in $50 monthly contributions from different ages.
Invest more than $50 a month and you’ll see even bigger benefits to investing early.
The best reason to start investing is to change your role in life. Living paycheck to paycheck, constantly just paying bills means you’ll always be renting from the owners of wealth. Investing in stocks, bonds, real estate and other assets means you are an owner rather than a debtor. You own the assets that other people rent and can control your own financial future.
It’s one of the keys to financial freedom, stop renting your life and start owning it!
How to Start Investing for your Financial Freedom
I plan on covering how to open an investing account and different online options in an article next week. There are quite a few options available, almost too many, but the fact is you really don’t many of the special features that come with different brokerage and investing accounts.
Starting investing means understanding how much you need to reach your financial goals and how much risk you’re willing to take. We looked at how to create a personal investment plan in an earlier post, an essential plan for any new investor.
Opening an online investing account will save you from the higher fees charged by brokers. I opened an account on Motif Investing and the option to create my own funds without the annual expense fees on exchange traded funds.
For $9.95 you can buy a group of 30 stocks around a common theme and hold them forever without annual fees. Buying a few funds like this will help diversify your investments across hundreds of stocks and reduce the investment risk from any single company.
Get up to $150 when you start trading at Motif Investing.
I’ve spent my career analyzing stocks and learning how to manage people’s investments. The simple truth though is that you really don’t need all the technical insight to do very well investing, in fact sometimes all the investing strategies cause more problems than they’re worth.
Plan your investing strategy around the top 10 investing basics and you will be closer than most to reaching your financial goals. While investing is about making money off your money, a lot of your account is going to be the regular deposits you make. In fact, earnings don’t account for more than your deposits until nearly two decades of investing at the market return.
The worst thing you can do is give in to some of the worst investing myths, things like chasing high-flying stocks and gambling with your money.
It’s only through being an owner of assets that you’ll be able to achieve the financial freedom that many take for granted. It can be intimidating to start investing and planning for your future. You don’t have to jump at it with everything you’ve got but it’s so important to start now.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.