Today is the day. Today is the day that you are looking to start your investing journey. You have worked hard all your life. You might have struggled for years to pay back your debt. Or your salary has finally reached a point where you can start saving. Or you are nearing your retirement and planning to be a full-time investor.
We are all at different stages of our lives now. But, I have 7 good reasons for you on why you should start investing now.
If your savings are just sitting in a bank, they are actually rotting in value every day. That is because of inflation. Think of how much a typical meal would cost 10 years ago compare to today. A dollar 10 years ago would worth much more than a dollar today. In order for us to maintain the value of our money, we must be earning more than the inflation rate. In Malaysia, the inflation rate is around 4% to 6% a year. That means that our RM 1,000 today might lose 4% to 6% if its true value by next year. Given that the fixed deposit rate in the country now is only about 3%, we would still lose 1% to 3% even if we put all our savings into a fixed deposit account.
The case is the same in Singapore. Although inflation is much lower at about 1%, the fixed deposit rate is still even lower. Only through investing can we hope to grow our money faster than inflation. If we sit and do nothing, we will just be poorer next year.
- Power of Compounding
Compound Interest is the eighth wonder of the world!
A great article by Businessinsider highlighted the power of compounding. If someone delay starting investing by 10 years, he might end up being one-third poorer than if he started 10 years earlier. However, many people do not realize that compounding would only show its magic at our investment grows to a critical mass.
In a Marketwatch article, it shows that Warren Buffett took about 40 years to reach his first billion dollars. Yet, it took him another 30 years from then to add close to US$70 billion to his net worth. That is the power of compounding. So every single day we wasted not being invested will compound to a huge loss for us in the future.
- Low Yield Environment
Ever since the global financial crisis, the world has been living in a low-interest rate environment. As we discussed, the saving rates at banks would most likely not be high enough to fight inflation. The bond market is in a similar situation. Property prices all over Asia have been shooting up and have many experts calling it an asset bubble in the making. The stock market seems to be one of the few asset classes that could generate superior returns for investors.
- Expand Your Horizon
When we are working, we are specialists in our job. We know our role so well that we could do it with our eyes close. However, when it comes to investing, we must enlarge our horizon. We need to think like a CEO, read like a CFO and image like a CIO.
From learning about investing and researching in potential companies to invest, we will be able to widen our views about different industries and the world. We might be able to see more opportunities in the things around us. For example, as we discussed before in the previous post, a simple breakfast at home might lead us to a great investment idea!
- Network with Business Leader
Investing in the stock market is not just about making money. It is also about gaining experience. Want to talk face to face with billionaire Li Ka-Shing? Or Want to discuss on future markets to expand to with AirAsia’s Group CEO, Tony Fernandes? Being a shareholder of their companies would allow you to join in the Annual General Meetings. In there, you have the opportunity to meet these business leaders, share ideas with them and even question them on the performance of the companies. These are experiences that most people might not get a chance to. Yet, you could so easily achieve that by simply investing in the stock market.
- Teach your kids good financial habits
Moreover, investing is a life-long journey. We should not see it as a get-rich-quick scheme. But rather, it is a way for us to increase our long-term return on our savings. Some of these returns are in financial gains, but some of it are intangibles. One of the most important of such intangibles is to teach our kids good financial habits. When they see you actively managing your investments, they would see and learn that it is vital to be financially educated and let your money work for you.
It would help ensure that they too can be financially independent in the future. (Plus, in that way, you can spend your retirement funds on yourself instead of helping them too.)
- Be Financially Free
Do you have a dream to live your life on your own term? Do free enough to do whatever you want, whenever you want it. That is the life of a financially free person. And that is not impossible. However, it requires patience and determination to reach that goal.
Not only would you need to save ferociously, you need to learn how to start to manage that wealth properly.
To learn more about how you can start managing your own wealth, subscribe to our monthly Asia-In-Focus Report. We will share with you the system that has helped us in our investments over the past decade. Subscribe today to get a free E-Book from us as well, Our Stock Guide 2017: The top 10 stocks in our watch list today.
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