The greatest appeal behind being an investor lies in the potential for great returns. If you do your homework and invest wisely, you just might break the bank. Attempting to build a fortune from an initial investment is a sound financial decision but how much money are you realistically and reliably able to make for your family. Given you have a family to take care of, engaging in such a venture might put you in a very precarious situation. Consistent saving, on the other hand, always ensures you are sure-footed and gives you the luxury of predicting when you’ll be able to achieve specific financial goals.
Benefits of saving
Saving and investing go hand in hand. It’s been proven that investors who consistently save over a given period of time often end up making more earnings than their counterparts who don’t bother to save. This is contingent on the fact that the investor will maintain a steady streak of success the entire time. Take two examples of investors: Investor A saves $10,000 whose interest rate stands at 10%. Investor B, on the other hand, earns a 12% interest from his investments and doesn’t save any of it. Over the course of 20 years, Investor A will make more money despite having a lower rate of interest as his principal amount will be higher every year. After 20 years, investor B would trail investor A by almost half the amount. This low return might force investor B to contemplate taking more risks in order to make more money which can result in plenty of losses in case he/she fails.
Focus on the things you can control
Given how volatile the financial markets are, you only have one thing you can control which is the amount of money you save every month. Whether the market is doing well or poorly, constantly building your capital base ensures you can make the best out of a well performing market and able to cope with a poorly performing one. You will, therefore, be able to make slow and deliberate progress towards your financial goals.
Compound interest will never let you down
The odds of doubling the principal amount of money you started out with when you started saving are much higher than doubling your initial investment. A perfect way to illustrate this would be to use the ‘rule of 72’. To know the time you will take to double your starting capital all you have to do is divide it by the rate of interest. Let’s say you divide 72 by 6 to get 12. You’ll have to wait 12 years for your money to double. In order to achieve the same fete using the investment route, you are going to have to hope that your investment would double in 7 years following a highly unlikely 10% rate of return. Relying on an investment is a big gamble while compound interest always delivers. Given you have a family who’ll be relying on you deliver on your financial obligations, being certain about your financial future is imperative.
Starting early will give you an edge
Your parental responsibility requires that to plan for all your children’s needs at the present moment while at the same time planning for your retirement. This will require you to figure out a way to make the most out of your savings so that you are financially secure once your children move out. Starting early will make all the difference in all this as the amount of earnings you’ll make in 20 years if you start now will far surpass those you’d make if you started 5 years from now.
One should therefore prioritize saving first as the earnings are reliable and higher in the long run. Nevertheless, if one is interested in the potential benefits of investing one should not only set aside a bit of cash, but also work with a leading brokerage firm that can serve as a guide while doing so e.g. CMC Markets. This will ensure you’re strategically placed and able to make regular earnings. Savings should be your priority though.
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