Investing: Start Small and it will Get Bigger
Mutual funds, stocks, bonds, high-yield accounts, stock splits.all the financial jargon that surrounds investing can give you a headache and make you think that you'll never get there, right? Wrong! Don't get bamboozled by all the dense financial language. It's just language, and if you end up wanting to invest in those areas, you'll have time to research those areas thoroughly before you invest.
That's the beauty of starting small-it gives you time to do research, plus it probably fits into your budget a lot better than a huge cash outlay. So how do you start small for investing? Here are a few simple rules of thumb (some of which we covered in a previous article about saving small) to get you started:
- Save Small Amounts Steadily. Most of us don't have a lot of available cash to invest, but we probably can save $15-$75 dollars a month. Even these small amounts are enough to get you started. Never underestimate the power of small amounts! Remember that Albert Einstein once called compound interest mankind's greatest invention and the 8th wonder of the world. Compound interest in anything turns small amounts in large ones.
- Research While You're Saving. Since small amounts can take a while to build up, this gives you time to research where you'd like to eventually invest your money. Do stocks and bonds appeal to you? Mutual funds? Collectible items on eBay? Classic cars? Baseball cards or stamps? Real estate? Whatever, your fancy, start doing the research now. Find out what all the jargon means, how it's done, what the risks are, what the initial monetary requirements are. You can find out a lot by reading books, researching on the Internet and talking to experts. It should be an area that fascinates or interests you, meets your acceptable risk limits, and doesn't require a huge up-front investment.
- Experiment While You Save. Once you've done the basic research, set aside a small portion of your savings (if possible in your area of interest) and experiment with it. For instance, if you want to buy and sell stamps, invest that portion of your savings into a few stamps. Research them, buy them, hold them for a while (if that fits into your investment strategy) and then sell them. You'll learn a lot more this way than you would just reading books.
- Develop Investment Goals. Once you've done some research and experimentation, you'll have a pretty good idea of what's possible in terms of return on investment. Based on this information, develop some solid financial goals for yourself. These goals should include the amounts you want to save each month, how you want to invest your savings, and what kinds of returns and risks you expect from your investment. Having a concrete financial destination in mind will help you stay on track when you're tempted to buy that hot new plasma TV.
- Get a Mentor. There's nothing like standing on someone else's shoulders when you're just getting started. Find yourself a mentor, someone who is already successful in the field in which you want to invest. Most of these people had mentors, too, and will be happy to help you provided you're a good listener and apply what they teach you. Don't know where to start looking? You'd be surprised. A friend of a friend may be an expert in stamp collecting and sales. You never knew that because you never asked! Start asking and the Universe will bring you a mentor. When the student is ready.the teacher appears!
We hope that these simple guidelines help you begin your journey to fun, adventurous and prosperous investing. Remember that investing does not have to be traditional. Anything that increases in value over time (or to which you can add value and resell) is an investment. Anything which gives you more money in return than you put in is considered an investment. Sometimes the best investing isn't where your head is, it's where your heart is-in something that you're passionate about. We know a lady who loves horses. She doesn't ride them anymore (being over 60 years old), but she loves to hang around them and she knows a lot about them. She invests her money in horses. She buys one horse a year, puts it in training with an excellent trainer, and sells it at the end of the year, usually for 10-30 times what she paid for it (remember expenses are high for horses). It's not a traditional route to investing, but it works for her and she loves it!