Introduction
 If financial independence is your destination, then investing is your means of transportation. You can become a successful investor by learning the basics, being committed to the process, and periodically adjusting your plan to meet your changing needs. This program covers the fundamental aspects of investing, including:
- The Power of Investing
- Investment Considerations
- Types of Investments
- Managing Risk
- The Investment Process
Chapter 1: The Power of Investing
You work hard for your money – so why not let your money work hard for you? Investing your savings into vehicles (stocks, bonds, mutual funds, and much more) is a wise and efficient way to build wealth.
Long-term Growth
First recognize that there is a big difference between investing and gambling. While gambling is hoping you will win a bet with a big pay-off in a short period of time, investing is committing money for the long-term in order to gain a calculated financial return. Investing is done through well researched, and risk-managed moves – not luck of the draw.
Successful investing requires action: you must assess risk, research your options, and understand your needs, motivations, and overall financial circumstances. You also must be committed to the process by monitoring and managing your collection of investments, called a portfolio, on a regular basis..
Compound Interest
Because of the power of compound interest (the payment of interest on principal and previously accumulated interest) it is remarkable how quickly and substantially your money can grow. Consider an annual investment of $2,000:
Years Invested |
Total Invested |
8% Return |
10% Return |
5 |
$10,000 |
$11,400 |
$12,210 |
15 |
$30,000 |
$54,300 |
$63,550 |
25 |
$50,000 |
$146,200 |
$196,700 |
35 |
$70,000 |
$344,700 |
$542,100 |
Harness the Power of Time
The earlier you begin to set money aside, the longer your investment has to take advantage of compound interest. $100 per month invested for 30 years, with return rate of 11 percent, would grow to about $280,450. $500 per month with the same return and time frame would grow to about $1,402,250!
Offset Inflation
Investing your money also offsets inflation – the gradual upward price movement of goods and services. The average rate of inflation is now about two to three percent. This means that when you invest, the earnings your investments make should at least keep pace with inflation so your dollars don’t lose value – and if you want to make money, your rate of return must be higher than the average rate of inflation.
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