Nine out of the ten people I know don’t have good idea on how to invest money. Even if they know how to do it their options are limited.  They have learned about two to three things with which they keep continuing for rest of their lives. Learning to invest money is such a sacred practice they do their best to avoid it. The fear of loss is so high that they prefer to invest in instruments that have been there for generations. While there is no harm in investing in things which we trust but limiting our choices has a direct impact on our returns.

We give best of education to our children and are always concerned about their growth. We learn new things so that the growth of our children is good. We always go out of limits to provide best of facilities to children. Why it is different when it comes to money. You work so hard for it away from your family but when it comes to its growth you are just clueless. The only way for anything to sustain in this world is by growing. If you don’t learn to invest money in order to make it grow it is bound to get depleted.

The problem is most of us realize this and even try it but to limited extent.

The basic reason why don’t people learn to invest money is

1) The fear of losing it

2) They are too lazy

3) They got no interest to learn it.

The end result is that

1) They either don’t invest

2) They invest based on third person advice

3) They invest but in things which are not much beneficial.

Compare it with raising your child

1) You don’t care about their growth

2) You don’t trust your instinct to raise your children but that of someone else

3) You are little concerned about how they are growing.

If you work so hard for your money shouldn’t you also make it work hard for you too. Investing your money is simple 7 step process. Learn these steps and you would learn to invest money on your own.

No matter if you have one dollar or millions, the sooner you learn how to invest money the better it is for you to multiply it rapidly

1) Know What is Investment- Putting your money on things that appreciate in value or price constitute investment. If you put money in a house, bonds or other instrument that gives you more money – It is called investment. However buying things like car, music systems, mobiles which lose their value the moment you buy them are nothing but depreciation. It is more of a splurging or spending on something that eat away into you savings.

2) Planning for Contingencies- Keeping aside some money for emergency so that your investment doesn’t get bothered is an important part of investing. Your investments need time to mature and in no situation you should break them for any of your need.

3) Minimize Borrowings- Anything which put you under debt can potentially impact your investments. There is no point in investing in something which gives you less return than return you pay for the borrowed money. Remaining debt free or if you follow sane repayment habits are important to prevent exposure of your investment.

4) Determine who you are- Determine your risk profile. Investment need time to mature and they are generally associated with your age. Young people can take more risk because they can give their investment more time to mature than old people. Also how easy or difficult it is for you to bear loss is another factor that influences your risk profile.

5) Determine the right proportion- You can get low returns by investing all you money in debt instruments like bonds or can risk all of your money by putting them in stocks with greed of high returns. In order to get respectable return you need to invest them proportionately between things that give fixed return and stocks. The loss from money invested in low return yielding instruments gets compensated by limited risk taken in high return stocks. They complement each other to make your kitty healthy.

6) Research- The most difficult part in learning to invest money is researching. But it is the most important part. You need to start somewhere and today is the best day. You might need to put some extra time at start but afterwards you just need 5 minutes to remain updated. At best a little knowledge can help you put in a situation to ask difficult questions to people who advices you in such matters.

7) Exit- Good returns need time and you should not hurry at all. It is also important to churn your portfolio. It is always advisable to set your targets and exit as and when you achieve them. Long term investment puts the odd in your favor.

Money is important and equally important is how we save and grow it. A blind trust on others to manage your money or making it sit idle is not a wise decisions. Investing requires little effort but it is worth it. The game of numbers is just amazing. And yes, you don’t need million dollars to learn to invest money. Any amount is good amount to start and grow your money. Learn to invest money, it is worth it.

Photo Credit- Cayusa

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