The Magazine for Asian Investors
Who thinks in their early 30s what will happen in 40 years?
Last week I had a little exchange with my older sister about the usual topics like politics, getting older and financial freedom. I like this kind of discussion with her because she is very direct and thinks very differently than I do. I talked to her about how we are responsible for ourselves, especially our financial security in retirement, and how important it is to start investing. She just said she doesn’t have the money to invest…. As someone who knows her financial situation, I can understand all too well how difficult it is for her to think about investing in the current situation. As a single mom and in the current Covid situation, the budget is not particularly generous.
Ironically, it’s these people who don’t have much who can’t afford anything when they get older. I see in many countries that older people depend on their families, friends, or donations. Even in industrialized nations like Germany, older people who have worked all their lives but receive only a small pension have to go to aid institutions to get food from donations so that they can survive. In contrast, things are even worse in developing countries. Here, many are dependent on family or donations because they do not receive any pension at all.
It is therefore urgently necessary to secure themselves financially in order to be financially independent at least in old age. But how do you do that if you don’t have $1000 left at the end of the month?
Whether it is $50, $100, or $500 it is important to make the decision to start
There is no general strategy that fits everyone. Everyone is in a different situation. So it depends on you what you are willing to invest. By invest, I don’t just mean your hard-earned money. But also time! Whether it is $50, $100, or $500 it is important to make the decision to start. What should you do before you start?
- Set your goal and strategy
Be clear about why you want to invest. Whether the goal is to build a retirement plan or to achieve financial independence. Think about exactly what you want to achieve. Also, think about what you want to invest in. There are many ways to invest such as gold, stocks, bonds, cryptocurrencies, ETFs, and so on. Find out exactly what you want to invest in or look for a competent financial advisor.
Practice patience and discipline. Investing is not a sprint but a marathon. Investing is above all a matter of character.
- Financial education
Start getting financial education. Books are a great way to start. “The Intelligent Investor” by Benjamin Graham is a strong recommendation.
Online sources are another tool. Read financial news on Yahoo Finance or Morningstar, for example. News of the financial world may seem confusing and complicated at first. Be patient and disciplined. In time, you will understand concepts and connections.
Learn from the best. Look at what the best investors are doing and listen to what they have to say. Warren Buffet has seen just about everything in his investment career and has incredible skills. Make investors offer podcasts, give interviews on Youtube or have their own channel.
Even if I recommend everyone to acquire financial education themselves, I can understand people who do not want to invest the time. In this case, a competent financial advisor can help or mutual funds or ETFs. The most suitable are ETFs or mutual funds that track entire indices such as the S&P 500 or Dow Jones Industrial. In the chart below you can see the performance of the S&P500 over the last 10 years.
Over the long term, you would have had a good return on your investment.
In the past, I probably would have suggested high-grade bonds as well. Right now, however, the return is about 1.3%. With a currency that is currently losing 5.4% of its value every year, you would have -4.1% at the end of the term. A safe minus investment.
- Set a budget
Determine how much you want to put into your investment at the end or beginning of each month. Only invest what you can afford. Investments no matter how safe they seem are always risky. Be disciplined and try to increase your portfolio every month. If you start with $100 per month you will have $1200 invested after one year.
- Find a broker
To invest in private stocks you need a stock account. You can open it in the bank or online. Many brokers offer apps that make investing easy. Best you compare several with each other to find the best for your needs.
After you have laid the foundation, it is time to work on the goal you have set for yourself. In doing so, remember to be patient and disciplined. Don’t get cocky when you have your first success. Don’t be impatient when the successes come slowly. Investing is a long journey.
Please note that this is not financial advice. Do your own due diligence or consult a competent financial advisor.