Managing your finances isn’t all about saving and spending; with the right investment moves, over time, you can double your investment.
Rather than think of investment as high-risk gambling, think of time-proven strategies that have helped countless people achieve double or even triple the amount of their investment through simple, risk-free, or low-risk investment strategies like compounding interest on high-interest savings accounts, retirement accounts, real estate investing, and a host of other investment tools.
In the end, it’s all about smart investing. Therefore, these 9 easy investment tips can help you build your wealth without you taking the front burner.
Grow Your Money Faster: 9 Easy Investment Tips
1. Start Your Investment Journey Early
There is a saying that the best time to plant a tree was ten years ago; another good time is now.
Your investment has more time to more than double your return, and this is so if you start early. The good thing about investment?
As an investor, no amount is too great, and no amount is too small to start with, and nobody is too old to invest.
If you invest in an index fund, with as little as $100 monthly, you can watch your investment bring in a massive return to the tune of $12,000 in just eight years, and more than $30,000 in 30 years.
2. Set Clear Financial Goals: Know Your Purpose for Investment
Before you start investing, ask yourself, “Why do I want to invest?” You could be investing to buy a home, save for your kid’s college, for retiring early, or for the fun of growing your wealth.
Irrespective of your reasons, you could come out with clear financial goals that could keep you focused on building your investment.
Low-risk investments like high-yield savings accounts, money market funds, or short-term bonds are more suited for short-term financial goals achievable within 1-3 years.
A mix of stocks and bonds is preferable for medium-term goals achievable within 3-5 years.
While investing in high-risk assets like stocks, real estate, or crypto can easily meet your long-term (above five years) needs.
With this in mind, it will be easy for you to tailor your investment to meet your needs.
Read Also: 7 Superb Financial Goals You Can Attain
3. Educate Yourself Before You Start Investing
A significant portion of retail investors admit to making investment choices they are not informed about and impulse investment choices they regret making by listening to friends and following social media trends.
Before you get swayed by “investment trends,” make proper findings about what you’re investing in, and learn how the investment works.
Generally, the key to making smart and informed investment decisions is learning the basics of how different investments work, from stocks and commodities to cryptocurrencies and real estate.
Finance blogs, books on finances and investments like (The Simple Path to Wealth, Rich Dad Poor Dad, the Richest Man in Babylon, are some examples of finance books to get you started), Podcasts, Online course platforms like Udemy and Cousera are some of the starting point on your determination to learn about finance.
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4. Diversify Your Investment Portfolio; Spread Your Risk
Diversifying your investment across several investment types, assets, and industries protects you from the risk of losing all your investment in a single market downturn.
For example, investing only in stocks can result in you losing your investment capital in a stock market crash.
An ideally diversified investment portfolio will include stocks from various sectors like health, technology, healthcare, and energy, commodities like crude oil, gold, and silver, real estate either directly or via REITs, Bonds or fixed-income assets, etc.
Investing in ETFs and index funds is a more simplified approach to automated portfolio diversification.
5. Use Budgeting and Automation to Intentionally Set Aside Money for Investing
A modified rule for budgeting would be 40-20-20-20, which translates to budgeting 40% of your total income on essential needs (food, bills, and transport), 20% on non-essential wants (cravings and dining out, holidays, clubbing), 20% for investing, and 20% for savings for other purposes.
Automating your savings and investment fund will ensure automatic transfer from your checking account to your investment account every month, helping you to be consistent in building your investment.
Brokerage firms will allow you to set up recurring contributions to your investment portfolio, while investment apps like Acorns and Stash will help you invest leftover cash from everyday purchases, making investing effortless.
Read Also: 8 Spending Habits You Should Imbibe When Passing Through Financial Crisis
6. Use Time-Proven Investment Strategies to Minimize Tax Cuts and Investment Fees
Your investment strategy should also focus on minimizing tax cuts (not avoiding tax) and investment fees, which, over time (over 30 years), can cost you tens of thousands of dollars.
The profits you made from buying and selling stocks through a broker are taxable, but the amount you pay as tax depends on how long you have held the stock, what tax bracket you fall in, and other factors that could see you paying more taxes.
You can use strategies like tax-loss harvesting to sell off investments in your portfolio that have lost value to offset taxes accumulated on gains from other investments, to ensure that more of your money stays invested, while a significantly small amount offsets taxes from gains.
While making such a move, you should watch out for the wash sale rule, which disallows the loss if you buy a similar investment within 30 days after the sale.
Other tax-advantaged strategies you can cash in on to minimize taxes include tax gain harvesting, asset location, tax-deferred growth, Roth conversion, and 529 plans.
Tax-advantaged accounts that give you a good tax cut on your investment include a Roth IRA, which allows you to pay taxes first and enjoy tax-free withdrawals later.
Traditional IRA or 401(K) allow you to enjoy tax-free contributions, but your withdrawals will be taxed, and an HSA account, which offers you a triple tax advantage if used for healthcare expenses.
7. Reinvest Your Dividends
Cashing out dividends accumulated from stocks isn’t bad and does not have a negative impact on your investment portfolio.
However, it can slow down your investment growth. On the other hand, reinvesting a percentage or all of your dividend into the same stock will see your stock growing; it’s a compounding effect that grows your shares over time, significantly boosting your return on investment.
Read Also: 10 Financial Habits That Will Make You Wealthy
8. Embrace the Dollar-Cost Averaging Strategy
Market volatility is a constant factor that should not affect your investment decision; rather than timing the market to make an entry when the market is down, embrace dollar-cost averaging, which involves investing a fixed amount regularly, irrespective of market highs or lows (volatility).
In the long run, your entry point is smoothed out, and the impact of short-term volatility is reduced.
A good strategy you can also embrace alongside dollar-cost averaging is the contrarian strategy, which is based on the principle of buying low and selling high.
In the true sense of it, when others are exiting, that should be your entry point into the market. This gives you the advantage of buying undervalued assets, which will recover and put you in good profit.
While you’re making regular market investments, take advantage of massive buy opportunities that will always come every once in a while when the market bleeds.
9. Don’t Make the Rash Decision of Quitting Your Job
Salary package, title, and responsibilities offered for a new job might make your jaws drop, but don’t be quick to quit your old job, especially if your employer matches your retirement plan.
Quitting your job prematurely can cause you to lose your employer’s contribution to your retirement account, which can cause a big setback to your financial goals.
If you must leave, make sure that you run checks, especially on your retirement benefits, to be sure it is worth it.
On the other hand, you should make proper findings to make sure that your retirement contribution will be matched, and also have access to other benefits like disability insurance, student loan assistance, HSA, and tuition assistance, which might have been denied to you previously, or do not match with your would-be employer.
Conclusion
Always have it in mind that growing your wealth is not an overnight magic; rather, it takes time, consistency, and discipline to attain financial goals.
So, be wary of get-rich-quick schemes that promise massive return on investments that sounds too good to be true.
To be successful as an investor, you should be committed to regular investment, portfolio diversification, and lifelong learning; most importantly, exercise patience and let time build your wealth.
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