Everyone earning a salary goes through the dilemma of whether to invest their money or save it for an emergency. While it is sensible to keep a fair amount of your salary aside for unforeseen circumstances, a portion of it must go into investing, else you’re losing out on solid returns. This article highlights 5 important reasons why you should start investing:
Compound interest really makes a difference
Compound interest is a very simple, yet powerful concept. Simply put, it involves earning interest on the interest you’ve earned. The sooner you start making your investment, the quicker your interest will start to gain more interest and the whole thing will begin to make sense. The amount might be small over a year or two but the longer you invest the more impressive it will become.
The concept of compound interest is extremely beneficial to those looking for greater returns with minimal hassle.
Returns at regular Intervals
Investments are of all kinds – some of which involve giving you monthly returns instead of having all your money locked up for a bulk withdrawal. They almost begin to function as a second salary!
Peer-to-peer lending is one such investment. In less than a decade, P2P lending has become an important financial resource helping to match those who are seeking to borrow money from those who are looking to invest and earn more on their money. So, what is P2P lending?
P2P lending is a method of debt financing that enables individuals to borrow and lend money from other individuals, without an official financial institution as an intermediary. It basically eliminates the middleman from the process of borrowing and lending. We’ll save the detailed explanation for later, but it is important to note that if you lend money to others using P2P lending, you will then receive monthly returns as the borrowers pay you their EMIs. You now have a second source of monthly income!
More time implies greater possibilities
The more time that you have to save, the more possibilities will you find opening up. Start investing earlier in life, and you can consider longer-term options that simply aren’t as viable for someone who is older. As you get closer to your retirement, it is more likely for you to become far more cautious with your investments.
You might also feel more free to take risks in the hope of earning higher returns. This is an aspect you might lack as you get older, as any losses you make will be harder to recover from. When you start investing earlier in life, you can feel a lot more comfortable with taking a few chances to see what happens.
Practice Makes Perfect
Investments are a technique best learned with time. Over a period of time, you actually start trusting yourself more and gain confidence to make larger investments with sufficient funds.
And the sooner you start, the more time you’ll have to practice making those decisions before they really begin to matter. You can learn as you go and make mistakes now, giving you the skills and experience you need to make the right decisions later on.
More savings than in a bank
The major incentive that banks offer to attract people is through interest on loans and savings account. For a person who looks to enhance his savings through a bank, the interest rates play an important role. If the interest rates are high, the returns on the amount that they put in the bank would be high, hence, the savings would go higher. However, the interest rates are fixed and relatively low. Therefore if you are in for receiving greater returns, it is more sensible to put lesser money in the banks.
Give yourself a chance with investments, moving swiftly up the ladder with great returns.