Money doesn’t just grow on trees and there’s no instant way to get rich overnight. One of the ways to multiply your coffers of money is by investing, instead of reducing your expenses.
Even though living frugally can help your finances, investing is the best and safe way that will have a big impact on your financial condition, especially in the future.
By investing, your coffers of money will increase every time. To get started, you don’t have to wait until you are rich and have lots of money in your savings account. In fact, you can start with very little capital.
Start Investing From Now
Start investing your money in various forms of business as early as possible. This must be done so that you get more income in the future.
For example, suppose you have Rp1,000,000 in cash and put it in your household piggy bank.
Currently, you can use the Rp1,000,000 to buy 1 gram of gold jewelry. However, in the next 10 years, your $ 100 bill may only be able to buy plastic jewelry. This is due to inflation. Inflation is a general and continuous increase in prices over a certain period of time.
Meanwhile, if you invest your money, for example in stock exchanges, deposits, peer to peer lending, or mutual funds, the minimum interest you earn per month is around 5% (depending on the company or bank you choose), thus increasing the value of your money to Rp1. 050,000 each month.
Prepare Capital To Invest
Remember a general fact that applies to any type of investment: The more you invest, the longer you invest, the more you earn.
So, to start with, you should prepare a special budget. A special budget here is that you have to set aside money other than the money used for daily needs.
If you cannot spare a large amount of money due to limited funds, you can start small.
Today, investments, such as mutual funds or peer to peer lending, allow you to start with a nominal value of IDR 100,000.
Choosing investment according to financial conditions
When doing investment activities, there are three factors that will influence your optimal return (return) in the future. The three factors are capital, risk, and objectives.
As previously explained, capital is used to start various types of investments. This type of investment can be in the form of stock exchanges, deposits, bonds, peer to peer lending, and others.
Then there are risks. Before starting investment, potential investors should know the ins and outs of the investment they want to make so they can make wise decisions based on how much risk they are willing to take.
However, keep in mind that the wise attitude in this case is to be able to minimize the risk of losses that may occur in the future, not to take big risks for the sake of returns or large returns.
Next up is the goal. Before starting, determine your goals first. So, by knowing how much the desired target, the length of time you have, the purpose of investing will make it easier for you to allocate your funds.
However, it needs to be underlined that this activity requires sacrifice in the present for more in the future. So, you have to be a lot of patience and be consistent with your investment.
Most of everyone’s biggest fear is losing money. It can be understood that investment is not 100% safe. However, you don’t need to be afraid of losing your money.
One of the steps you can take to avoid the risk of loss or loss of capital is not to put all your money in one kind of investment at once.
The following are the risks that are generally associated with investment:
Market risk is caused by the economic crisis. Market instability is caused by the decline in the value of the country’s basic assets so that investment productivity decreases.
Issuer risk is a condition that affects a company’s economic activity, such as bankruptcy, change in management, change in consumer preferences, and others.
And the basic asset value can change and the price of the security can change according to the risk of the issuer.
Legal and Political Risks
Basically, this risk is due to a region that is legally and politically unstable. These legal risks are related to changes in laws, regulations and so on that have the potential to reduce profits.
Buying and selling securities of a small company is much riskier than the process of buying and selling of well-known and large companies.
Therefore, consideration should be given to possible changes in the price of the security, depending on the value of the securities of a particular company.
Interest Rate Risk
Interest rates are the gods that investors have been waiting for. Value and profits depend on changes in interest rates.
Fluctuations in currency exchange rates affect the value and returns of investment.