The thought to start investing for the first time can be scary for many of us. However, investing is not as scary as it may look or sound. Below are 3 things that I thought you should know as you begin this journey.
- Begin as soon as possible
I know it may sound like a cliché, but the most important step in investing is to get started. And get started now! Starting is always the hardest part, the fear of losing money, the overwhelming information and options out there and not knowing where to start is among what keeps us from starting our investment journey. However, you need to just start and once you are past that, investing gets a whole lot easier. The earlier you start investing the better as your investment will have more time to grow.
Starting early increases the effect of compounding. The longer you invest, the more money you will accumulate. Always remember that time is your greatest friend when it comes to investing. The longer you wait to start investing, the more you’ll miss out on that compounding effect and you will have to put away much more in order to catch up. However, don’t be discouraged, it is never too late to begin, you can start today!
2. Start with the little you have
Many people put off investing because they think you need a lot of money—thousands of dollars in order to start investing. This is not true. You can start investing for as little as Kshs 1000 per month. Just find the relevant investments that can allow you invest with the little you have. Don’t be too ambitious to start with investments that require huge capital such a real estate and you know you can’t afford it. Be patient to start small while thinking big and with time you can accumulate the huge portfolio you want.
Even during this time of year when you’re spending more money on all the holiday festivities, try find a way to put aside just a bit which you use to start with your investing journey. You can forgo that party, or expensive gifts or even that holiday and start investing with that little you have saved.
The key to building wealth is developing good habits like regularly putting money away every month. If you make investing a habit today, you’ll be in a much stronger financial position down the road. It only takes that little you have, consistency and time.
3. Investing is long-term
Investing isn’t typically a get rich quick tactic that you can do for a short period of time and expect to make a significant amount of money. It’s often a long-term process that requires patience, commitment, and keeping calm through market cycles, as the market will inevitably go through high and low cycles.
One of the advantages associated with long-term investing is the potential for compounding. Compound interest is when your investments produce earnings, those earnings get reinvested and can earn even more. The more time your money stays invested, the greater the opportunity for compounding and growth.
In addition, it is very difficult and risky to time the market. Too often, even the more experienced investors end up losing money trying to beat the market in the short term. Since the market is made up of cycles, the longer you invest, the more likely you will be able to weather low market periods. Long-term investing might also save you other expenses, such as taxes and transaction costs from active trading.
PS. None of this content is financial or investment advice. It’s for educational purposes only. Please do your own research and/or consult with a professional if you want advice customized to your specific situation.
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