One thing that is almost certain is change. Change is constant. Nothing is forever the same.
One powerful proof is we all get old and there is no stopping time from moving forward. The song “Some Good Things Never Last” showed that even in the field of romance, nothing is permanent.
As per my personal experience in my former job, I have seen changes in my tenure. From day one, I told myself that I will serve my employer until I reach the age of 60.
How would I have known that my retirement at age 46 be dependent on the company’s change of direction? Luckily I was able to do something earlier that majority failed to do: I took the risk and INVESTED.
As Facebook founder Mark Zuckerberg said, “The biggest risk is not taking any risk. In a world that changes really quickly, the only strategy that is guaranteed to fail is not taking risks.”
What is investing?
Investing is an act of buying assets with the hope that it will generate income or will appreciate in the future. Most of the time the investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.
Investing also can be in the form of time you put into the study of a prospective business. It must be noted that time is also money. Facebook was a result of investing in time wherein Zuckerberg is reaping tons of benefits today.
His idea benefitted us all by making us connected and making him one of the richest people in the world at a young age.
Why invest?
Investing wisely is the key to building wealth. But remember that investing comes with risk. The return is not guaranteed so it is very important to make a research on the instrument. To build wealth, the investment must outpace inflation.
As price of goods keep on going up, our money should grow at a faster rate so that our money does not outlive us in the future. Otherwise, in our old age, reality will set in and no amount of regretting can help us recover our lost ground.
How to invest
Depending on the knowledge acquired, you can make an investment via a bank, a broker, or even in an insurance company. In most cases, these organizations pool the investment money to make more large-scale investments, and each individual investor has a share of the larger investment.
You can also make an investment with a broker, who will handle the order in exchange for a fee or commission.
Types of investment
There are two major kinds of investment: fixed income and variable income. Fixed income investment refers to an investment instrument that brings in a regular amount of interest income on a regular basis, such as bonds or time deposits.
Variable income investment refers to business or property ownership such as mutual funds or stock shares. In the variable income investment, the income that results can come in many forms, including profit and appreciation specially on long term. Another earning can also come from trading/speculating which are short-term and often deal with heavy turnover and, consequently, a higher amount of risk.
Before investing, make sure you have the following:
1. Paid off-debts. Nothing beats being debt-free. Without debt, you are free from bondage.
2. Emergency funds. Emergency fund strikes anytime so it makes sense to have buffer fund so that you do not bother your money in making more for you.
3. Insurance. You need to cover life’s risks as the occurrence of the risks can easily wipe out your investments and might put you deep in debt.
Edmund Lao, is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 99th RFP program this January 2023. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-6248110.