There are many reasons why people invest, but for the purposes of this money mentor website, the main aim of investing, is to grow your money over time and to be able to produce an income later in life, that is capable of replacing your earned income so that you don’t have to work for money if you choose not to.
Investing is about taking control of your finances through financial literacy and knowledge, which you will gain by using our website.
The value of your investments will go up and down along your journey, but knowing this, and how the markets operate will empower you and give you the confidence to continue with your plan, through thick and thin.
Crucially, to be able to achieve financial freedom or financial independence, you will have to invest. Saving in the bank isn’t going to produce the results you need, and short of winning the money or inheriting it, there isn’t another legal option available.
My own experience of “wanting” to invest, came relatively early on when I was in my late teens. I had, like you are doing now, digested information on finance and investing, and was excited about the potential of small amounts of money being regularly invested over a long period of time, compounding into life-changing sums of money, enough to even replace a decent salary. This certainly appealed to me, as I liked the idea of my money making more money than I could earn, through doing a job.
My investment journey has not been perfect by any stretch of the imagination, and I must confess to spending far more than I saved during my twenties. There have been many calls on my savings as you would expect throughout the usual passage of life, with cars, holidays, houses, weddings and children, all denting the pot.
That said, I can at least confirm the theory, through practice, that saving small sums regularly over a long period, does produce some very exciting numbers, or at least it has done for me.
After 30 years of saving £250 per month at 1%, your pot would be worth £104,907. But if you had invested that same £250 per month over the same period, and enjoyed an average 10% rate of return, your pot would be worth £565,121. Or five times more. The differences are even larger with higher monthly contributions, longer time frames, or higher rates of return.
In hindsight, I think I could have replaced my income and semi-retired five to ten years before I actually did, If I had followed the don’t spend too much rules a little closer, and put a little more money to work in assets, as opposed to enjoying the folly of youth!
But as they say, hindsight is a wonderful thing!