I hope you won’t find it surprising when I say that once upon a time, my knowledge on finance matters was nil (excuse: I hail from the field of software!) The little I knew, I learned from the basic accounting class, which was taught in school.
After graduation, I got a steady job and along with it came an appealing paycheck. Little by little I managed to grow my savings and one day I realized that I have an attractive amount nicely sitting away in the bank. I spoke with one of my finance literate friend’s and was advice to invest the money.
He used the word investment, and to me, it sounded like something only the rich do or something that only a skilled professional can do. My friend patiently explained to me in layman terms that, I need to make my money make more money for me. Now that got me interested. Here I was working 60 hours a week and I was dreaming how nice it would be to double my salary without actually working for it!
Irrespective of how attractive that thought was, that alone wasn’t sufficient for me to take the plunge on investing. Years later, I have educated my self on various finance matters and I consider myself to be wiser (and older!) than before. I wish I knew then what I know now… for I would have definitely taken some steps towards investing. Had I done so then, I probably would have been a millionaire by now!
If.. would... could.. Yes, I know, I can’t change the past. I am glad that I am into investing now, even though it’s a few years overdue. So today, I will share with you a few misconceptions that I had, with the hope that you won’t make the same mistakes I did. Your million may well be within reach!
#1. Investing is too riskyAs an undergraduate, I watched a lot of movies. "Wall Street" was also amongst them. Now, "who in their right mind would invest after watching that" I thought! I didn’t want to see (or imagine for that matter!) my hard earned money disappear overnight! Movies such as these intrigued me to find out more about such situations. I read books, read web sites and also spoke to a few investment analysts as well. The more knowledgeable I became, I realized that the risk level is entirely up to me.
I learned that there are "play safe" investing options such as bonds, as well as the other extreme of high risk-stocks! There is a fine line between risk taking and reckless suicide.
#2. Investing is too hardTo be honest, I was scared of those big finance words. I mean who knows what Fed Fund rates, mutual funds, indexes, or blue chip stocks are? At one point of time, these were all Greek to me! If I learned all these, so can you! You know, once you get the hang of it, it is not so hard to learn.
Perhaps the easiest and cheapest thing to do is to read around the subject. Articles related to how to learn to invest money can be found almost anywhere (books, web etc).
Luckily for me, I had a couple of indispensable assets; friends in the finance world. I couldn’t have done it without their patience and tolerance.
#3. Learning about investment is a waste of timeI should also warn you that if you ask your financial adviser or investment analyst they would surely tell you, "you don’t have to worry about it. It is what I do for you". You hand them your money and they will take care of it.
I don’t know about you, but I am investing MY money. For the investment analyst it is his job (no offense). I am probably the only one who cares a great deal about what happens to my money! So learning more on the subject is certainly not a waste of time for me.
#4. You need a lot of money to investAs I mentioned before, I thought that investing is something the rich did. I assumed that I needed a fair amount of money before I could actually start investing. Or may be I was looking for a reason to postpone investing!
#5. You need invest most of your savingsSince I didn’t have a big sum of savings, I thought that I would have to invest most of the savings. I was advised to set aside money for at least 6 months, for all my expenses.
#6. High investment returns mean more riskSo after my friend’s persuasion, my information dig up and analysis, I decided it was time, my money made more money for me. Through my friend I met an investment analyst and we were discussing my options. All of a sudden he was talking about high return investment. Alarm bells inside my mind went off. I felt that high return would mean more risk, and I was not about to take huge risks. I wanted my investment journey to be "slow and steady" rather than "very dangerous"!
My investment analyst assured me that it would only be dangerous if you don’t know what you are doing. He gave an example of driving a car and went on to say “when you put someone in the driver's seat who doesn't know how to drive, a relatively safe trip becomes an incredibly risky trip”
To be honest, I am still a bit skeptical on this one. After all, this was coming from someone who was getting commission! However, I managed to make a compromise with a share of high and average investments. Do you have any experiences related to high investment returns? Was the return worth the risk?
The earlier you start, the more money you will earn; the closer you will be, to your million! Even if it’s only a small amount, the money you invest today will earn you a big sum in the future. Good Luck!
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