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Saturday, November 11, 2017

Why It Is Important To Start Investing Early While You Are Young

The most common question young people ask today is "Would it be possible to start investing while you are young with limited cash on hand?"

The answer is a big YES! 

There are dozens of investing platforms available today that require as low as few thousands of pesos as starting fund. Financial institutions have done a great job of creating avenues for small time investors to participate in the game. 

In the stock market for example, online Brokers such as ColfinancialBPI TradeFirst MetroSec and many more allow you to start investing at 5,000 PHP of initial fund. Furthermore, companies such as BDOPhilam Funds  and  Sunlife allow you to invest in Mutual Funds with a monthly investment of as low as 1,000 PHP.

Investing Early Online Brokers
Photo credits: http://www.toper.ph/
stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. In other words, if you invest in Stock Market and buy stocks, you are literally buying a share or ownership of the company you want.
It is a type of investment wherein you join other investors and corporations to form a massive fund which will be handled by an expert/professional who is called fund manager for diversified portfolios of stocks, bonds, securities, money markets and other mutual funds.

Now, that you know it is possible to start investing early even with little funds, here are some more reasons why you should start investing as early as possible:

1. Learn by doing
It is known fact that the best way to reach financial stability is by engaging into business and investment and not by employment alone. But as young individuals, you surely could not do business yet because since you don't  have enough funds to start. But on the other hand, what you can do now is to start investing! To become profitable as an investor does not take overnight to achieve but rather through years of practice and study. As you start early, you can learn the necessary skills and knowledge overtime so that when you have enough funds to use, you will be able to manage them very effectively.

2. Take Advantage of Compound Interest
Albert Einstein himself called compound interest "the greatest mathematical discovery of all time". We think this is true partly because, unlike the trigonometry or calculus you studied back in high school, compounding can be applied to everyday life.  If you start investing today, even with my little funds, it has more opportunity to grow. Money and time are two best friends. Most of the successful investors and business people we know did not succeed overnight; rather they started early and took advantage of Compound interest to grow their money.

For example:
A single $10,000 investment at age 20 would grow to over $70,000 by the time the investor was 60 years old (based on a 5% interest rate). That same $10,000 investment made at age 30 would yield about $43,000 by age 60, and made at age 40 would yield only $26,000. The longer money is put to work, the more wealth it can generate in the future.
Source: www.investopedia.com

3. You will manage your spending habits much better
Earning money is fun! But at the same time entails more responsibilities. The tendency we have is developing very unhealthy spending habits as soon as we start earning money. Putting your money in the bank or keeping it for yourself encourages that tendency. Since you have full access to your money, you are always tempted to use it whenever you want. Besides, you are expecting more to come in the next 15 days.

But when you start investing, that money is no longer accessible to you 24 hours. This will make you think wiser about the cash you have on hand. You will begin to restrain yourself from the things you want but don't need.

4. Learn the art of calculating and taking risks
Anything that is comfortable is rarely profitable. We knew this concept for a long time already. In order to achieve greater potentials of growth, we have to learn to manage risks. It is a fact that investing platforms that are low at risk have very low returns as well. If you want to acquire greater returns, you have to be courageous enough to take risks and manage them effectively.  And as mentioned, it takes long time of practice to be able to manage these risks. Starting very early gives you the time needed to learn everything about risks.

If you save money in the bank,  it can grow by less than .5% annually. The inflation rate in the Philippines for the year 2016 was .9-2.3% which means if you put your money in the bank, you already lost more than 1% of its value. On the other hand, if you invested in Philippine Stock market, your money would have grown more than 15%.

These are only few of the so many reasons why you should start investing while you are young. This is the time when you have more time to explore and experiment on so many different things. Your tolerance for loss is much more since you don’t have that much of responsibility at hand. You have more time to rebuild and regain from loss. If you want to learn more about investing, you can visit these sites:

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