Saving money is not a problem, especially if there comes a time that you’ll need any emergencies. Check out these tips for additional knowledge:
Expect the unexpected
It is always a good idea to have an emergency fund and a rainy day fund before you start investing. This is to ensure that you can handle the financial burden in case an emergency happens. It is dangerous to invest, especially in a high-risk one when you don’t have an emergency fund wherein you can quickly obtain cash for unforeseen expenses.
The early bird catches the early worm
When it comes to investing, the earlier, the better. Take advantage of the eighth wonder of the world — compound interest and invest early! Compound interest is the accumulated interest of an interest rate. To put it, it is known as the “interest of the simple interest.”
Be informed with different asset classes
Understand that there are four main asset classes wherein you can invest, namely:
Cash or Cash Equivalent Investments
Out of all the asset class, money holds the lowest risk. It is also the most stable. However, money has the lowest rate of return among all asset class typically.
Bonds can take in the form of a government bond. When you purchase a government bond, you exactly lend the government money. You’ll gain a profit when the government returns your money with a set of fixed interest rate on an established date. Bonds are one example of fixed-income investments.
Properties are tangible assets; it means that they can be ‘touched.’ This is to say that they are physical. Examples of properties are equipment, buildings, and land. It is crucial for you to understand that stuff and buildings tend to depreciate or lose their value as time goes by. While land appreciates or increases in value over time.
Stocks are fragments of ownership of a corporation or a company. Stocks grow in value as a corporation or a company thrive and prosper. Some companies also give stockholders dividends.
Pick your preferred asset class
After you have familiarized yourself with different asset classes, it is time for you to pick at which asset class you want to put your money on. It is also essential to know about good and bad investments. Investments are considered good if it manages to produce a profit that either surpasses the anticipated amount of return or if it generated more money than the investment’s actual value. On the other hand, investments are considered harmful, if it does the opposite —in which you do not garner a profit, or manufactured less profit than what was intended.
Michael started with a master’s degree in finance before he went into technology and coding. He is now a freelance journalist and video producer living in Berlin, Germany. When he doesn’t write, he will travel many countries.