If you’re reading this post right now, there’s a good chance you’re viewing investing through a narrow lens.
You might picture the chaos of Wall Street, brokers trading stocks, numbers increasing and decreasing in the blink of an eye, and letter abbreviations that feel impossible to decode as someone who is unfamiliar with this world.
I’m here to tell you that investing isn’t as some may seem. Yes, investing can take this form, but this is a heightened type of investing and trading.
In reality, becoming an investor is much simpler than it may appear. Though there are many different ways to invest, the general definition of investing never changes.
Simply put, an investment is an allocation of money toward an asset whose value gradually increases over time.
Think of investing your money as investing in yourself. It’s always worth it. When you invest regularly, you don’t only take leaps and bounds toward securing your financial future, you also grow your wealth year over year.
If you’ve been wondering if investing is worth it, let me give you some strategic advice that you can use to invest with confidence and certainty.
Is Investing Worth It?
The short answer is ‘yes.’ This is because your future is worth investing in, and every investment you make is added to that piggy bank fund that you’re saving for later.
That being said, the most important piece of investing advice I can give you is to make sure you start early…as early as right now! If you wait to put your money where your mouth is, you could lose out on thousands of dollars that could have been put toward your end goal.
The more time that passes while you’re trying to make a decision about investing for the first time, the more money you’ll need to put away every month in order to build your wealth.
And, if you’re thinking ‘How much money do I need to invest?’ The good news is you don’t need a lot to start. Coupled with the power of time and compound interest, your money can go a long way.
Benefits of Investing
The biggest (and most obvious) benefit of investing is that it allows you the opportunity to grow your wealth. However, the benefits don’t stop there. Other benefits of investing include:
Creating a Stable Financial Future
Feeling secure in your finances is one of the greatest feelings in the world. Imagine if you never had to worry about having extra money to cover unexpected bills or emergencies. Sounds pretty great, right?
Saving for Retirement
Along the same vein, if you would like to retire someday, you’re going to need the funds to be able to do so. When thinking about retiring, consider when you hope to retire and the lifestyle you’d like to lead once you are done working. If you want to retire early, you’ll need to begin investing now in order to promptly reach your goal.
And last, but not least…
Building Generational Wealth
If you’ve been thinking ‘Are stocks a good investment?’ I’ve got your answer.
Investing in the stock market is a tried and true way to build generational wealth for decades. Your investments will continue to grow year over year, keeping your family and loved ones indefinitely in a fiscally secure spot.
And, most of these benefits stem from a little something we call compound interest. Let me introduce you.
What Is Compound Interest?
When a beginners investor is asking, ‘Is investing worth it?’ it’s important to be aware of two valuable components that prove it is: time and compound interest.
Time allows you to invest small amounts of money gradually, but compound interest is what puts your money to work for you.
Essentially, compound interest multiplies your small investments into big earnings over time. It is commonly referred to as the interest you earn on your money plus the interest you continue to accumulate.
Embrace the power of compound interest and watch the value of your investments skyrocket.
How to Start Investing
Now, let’s dive into the actionable steps you can take to begin your investment journey.
Though there are many different investment strategies to choose from, we are going to focus on value investing because, when used effectively, it is one of the best ways to be successful in the stock market.
So, what is value investing?
Value investing focuses on investing in individual stocks, or wonderful companies, that are priced well below their value. But, before I get too far ahead of myself, let me walk you through each step that you can take to begin value investing.
Determine How Much Money You Want to Invest
You can’t start investing until you know how much money you have to play with, so this is your baseline for action.
Before you do anything else you need to determine how much money you can invest, even if it’s a small amount. It’s a misconception that you need to have thousands of dollars to invest You don’t— it’s easy to work within your budget.
Second, you must have a long-term view of your investing strategy and think about your goals to figure out how much money you would like to allocate toward accomplishing them.
Once you have done a little brainstorming, your next step is to put these plans into action.
Create an Investment Plan
Before you do any kind of investing, it’s crucial to create an investment plan that you can reference whenever you need to be reminded of your why—otherwise known as the reason you began investing in the first place.
Your investment plan should outline three things:
- Your Current Financial Standing – Put together a detailed outline that shows your monthly income, expenses, savings, and remaining funds that could be put toward investments. Remember to be honest with yourself about the available funds you have. This is an assessment of your current financial standing, not the financial standing you hope to have within the next six months.
- Your Goals – What do you hope to accomplish with your investments? This is your why. Be sure to make it personal and specific. The closer the tie to your goal or goals, the more likely you will be able to see your plan through to completion.
- Which Investments Are Best for You – What types of companies are you interested in? Which types of companies do you know the most about? Use this knowledge to your advantage. Your money will go further if you understand and enjoy what you’re putting it toward.
Learn About Value Investing
Building a baseline knowledge of how investing works is crucial to understanding the appropriate next action steps to securing your financial future using value investing techniques.
Value investing has been around for a long time, but it is by no means dead. It has simply evolved since its inception during the 1920s.
Originally, Ben Graham’s idea of value investing focused solely on examining the integrity of a company’s business.
Then stocks worth investing in would be identified based on the likelihood that they would have a strong intrinsic—or sale—value. Once other investors also decided to join in, the values of these stocks would rise to reflect their true value.
In today’s market, when we hear the term value investing, we think of something completely different. It refers to a more strategic approach centered on remaining patient before buying and thinking about the long-term effects of our investments.
Present-day value investing requires having background information on the intrinsic values of companies and then finding value at opportune moments in the market.
Invest in Wonderful Companies
Investing in individual company stocks offers you the greatest opportunity for inflation-beating gains in the long term…but only if you invest in companies you fully understand.
Many people steer clear of stock market investing because they fear losing money. However, the ones who do lose money are the ones who did not know what they invested in.
If you’re wondering, ‘Are stocks a good investment?’ The answer is ‘yes.’
But, it’s important to be patient and wait for an advantageous time to buy. Once wonderful companies go on sale, it is time to buy stocks.
Once you’ve done your research and discovered a few wonderful companies to invest in, you’ve established a good investing foundation.
Don’t feel as though you need to invest in a large number of companies in order to experience great returns. This is not necessarily true.
In fact, Warren Buffet is quoted as saying “Diversification is just protection against ignorance.”
The most important thing to remember is to use your head. If you have a solid understanding of various companies that you’d like to invest in across a variety of industries, then take the next step by effectively learning how to diversify your portfolio the right way.
Identify High-Return Investments
Of the wonderful companies that you decide to invest in, identify at least one that will be a high-return investment.
Ideally, you want to ensure that the money you invest is compounding as best as it can so you get the most bang for your buck.
Historically speaking, though, investments made in the stock market (wonderful companies) have been the only option to offer double-digit rates of return, so it’s a great choice to try your luck with this strategy first.
Know When to Reevaluate
A final point worth noting is that it pays to reevaluate your investments from time to time.
What I mean by this is to make sure you’re continually performing research in order to stay on the pulse of any significant changes that could impact your investment, such as adjustments to a company’s branding, value, management, or leadership.
These types of modifications can affect your money so it’s best to evaluate all your options before determining how you’d like to proceed.
Is Investing Worth It? Begin Your Investing Journey Today
That’s it! You’re now ready to begin your investing journey.
Remember, the best time to get started is now. Your financial future isn’t going to wait, so contributing just a few dollars can go a long way in only a few years.
Now that you know more, what do you think? Is investing worth it?
If you’re ready to dive deeper into stock market investing and what it can do for your wallet, download my Value Investing Cheat Sheet to get started with the right strategy.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.