Start investing as soon as you begin earning. One of the most important factors in how much wealth you can accumulate depends on when you start investing. There’s no better example of how the proverbial early bird gets them worm than with investing.Starting early allows your money to compound and grow exponentially over time—even if you don’t have much to invest. invest money wisely,Choose investments based on your “horizon.”
Your investment horizon is the amount of time you need to keep your investment portfolio before spending it. For instance, if you’re 40 years old and plan to quit working and live solely on investment income when you’re 65, you have a 25-year investment horizon. This is important to consider because, in all, the longer your horizon the more aggressive you can afford to be. If you have at least 10 years to go before needing to tap your investments for regular income, you have plenty of time to recover from temporary market downturns along the way.
But as you get closer to retirement, it’s wise to shift more of your investments into less risky investments so you preserve your wealth. Stocks are the riskiest investments because their value can change daily; however, they offer the highest returns. Bonds are less risky because they offer a fixed, but lower return.
And cash or cash equivalents, such as money market funds, give you the lowest, but safest returns. I recommend that you start by figuring out how much stock you should own. Here’s an easy shortcut: Subtract your age from 100 and use that number as the percentage of funds to own in your retirement portfolio.
For example, if you’re 40, you might consider holding 60% of your portfolio in stocks. If you tend to be more aggressive, subtract your age from 110 instead, which would indicate 70% for stocks. But this is just a rough guideline that you may decide to change. You might allocate your stock percentage to a variety of stock funds or put it all into one stock fund. The remaining amount would be in other asset classes such as bonds and cash. Port Elizabeth, South Africa
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