As with most things in life, the simple way is usually the best and investing is no different. Yes of course when you delve into the mechanics and different markets it can get complicated but we are talking about your average employee or small business owner that wants invest their money and make a tidy profit.

I have personally come across this simple method of investing many times when I was looking into it, the method in question is taking advantage of Compound Interest. Investing in anything is going to be a risk, whether it’s property or stocks or bonds. The safer you play it, the less the growth potential however, playing it safe and investing over time taking advantage of Compound Interest will allow for your portfolio to grow regardless of what the market does. There will always be ups and downs, but when you take a look at the stock market in general, historically it has always grown and will keep growing. This is down to a number of reasons, the main ones being inflation and growing population.

Trying to time the market all the time is virtually impossible
Yes you may be very good and have gotten it right once or twice, maybe even three times but constantly trying to get it correct every time will just lead to loss of earnings. Your best bet is to invest early and keep investing, even if it is just little amounts here and there. Waiting for the right time when you have x amount saved up ready to invest is just wasting time, time is money as they say and more so when talking in terms of investing.

A study (source below) done by Charles Schwab shows the huge difference between keeping cash, investing early, trying to time and failing as well as trying to time and getting it right. The results speak for themselves, although perfect timing does give the best result there isn’t much difference between perfect timing and investing immediately (around $12.5k over 20 years). Saving in cash however had a significant difference, for the worse. It was over $100k less over 20 years regardless of what the markets did.

Warren Buffett, who we all know as one of the greatest investors to have ever lived was asked about how he amassed such a big fortune. His net worth to date is around $75 Billion, that kind of money is incredible, far beyond anything any of us can imagine. His answer was three simple things, Living in America, long life and compound interest. If that doesn’t sum it up I really don’t know what will.

The bottom line:
Whether you have $20, £100 or €500 you can invest today, do it. Try to add to it as often as you can, monthly if possible. The best way to do it is to put money aside before your bills and your living costs go out. One thing to note is, you should always have set aside an emergency fund, this can be around 3-5 months salary. I do understand sometimes money is tight, but there will always be money you can save here and there. You will thank yourself in the long run. This is for your future, so please don’t rely on shrinking pension pots.

 

Invest today and keep investing. Be smart with your money, think like the 1%. GSY