Disclaimer, I am not a financial advisor, this is not financial advice so do your own research, your capital is at risk.

There are a few things you need to know if you want to start investing. I didn’t grow up with a money education, nor did I know how to invest money wisely, but this is what I have been doing for the last few years and it’s paying dividends – excuse the pun!!

Hopefully this post will be helpful for beginners and savers alike for those who are looking to build on their wealth and make their money work for them! If you want to get started with a free share worth up to £200 you can do so with my referral link. (disclaimer, we both get a free share)

How to invest money wisely.

Having saved and saved over the years and then turbo saved during my no-buy year I’m now looking to make my money work for me and seek financial independence, so if you want to do the same, I’ll share the tips I’ve learned to help you to build your wealth as well.

Money in the bank is not growing. It is probably actually losing value. Let that sink in.

It may be secure, but because of the rate of inflation and the ridiculously low interest rates, you will never be able to build money by putting it in a bank. So, unless your bank is giving you more than the rate of inflation (5.1% at the time of writing this) – which is highly unlikely, you will be actually losing money.

Though the investment market is volatile, and you can lose everything, the fact is you can earn ten times more Vs saving it in a bank if you invest wisely. My investments are currently up 35%+ – my bank is giving me a rate of 0.01%!

The eighth wonder of the world.

Compound interest

Let me tell you about a little secret called Compound interest, it is magic! Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.

If you can invest £500 per month over 40 years, it will be worth over £1.3 million, and you will have actually only paid in 240K. Although £500 may be unachievable, even cutting out some non-essential expenses (loads of money saving tips) and putting away £100 per month for that time will give you a return of £262K when you will have only saved £48,000 yourself. Magic.

You can read more about what compound interest is and the magic it works on your savings (if they’re in the right place) in a previous post.

It’s not about timing the market, but time IN the market.

Timing

The best time to invest was probably 20 years ago but if you haven’t started yet, then the best time to start is now. This is not about timing the market, to make a quick win, this is a long game and your money should be there when you need it most when you retire for example. So it is really important to understand to begin immediately as starting is the hardest thing. Once you do that you won’t regret it.

Dividends

Another way to make your money grow is to invest in dividend stocks. A well-established stock will generate money, so picking the right stocks is important. For example, if you invest in 30 stocks that pay a dividend of £2 each year, you earn £60. This is a strategic way, and if you cannot determine which stock is good, you can invest in a bundle of stocks of the well performing companies, like an index fund (such as the S&P500) You can buy this as one share, and even if one company fails you know you are not going to lose all your money. Equally, you may not earn as much money; if you are not risk-tolerant, this is a safer way to build wealth.

On average you’re looking at a 7-9% growth target, which is cautious based on the last 30 years of the stock market average of around 8% taking in to account inflation. If you are not getting this from your bank account, then this is the time to start investing.

Remember, I am not a financial adviser. This is just my personal journey to building my wealth and achieving some sort of financial freedom.

Financial Independence, Retire Early.

FIRE

I’m really interested in the FIRE movement – Financial Independence, Retire Early, and will share more on this in another blog post, but investing is a huge part of this journey, as is living below your means.

Emergency Fund

With all this being said, it’s really important not to be doing any of this without having your emergency fund in place. This should be 3-6 months of your living expenses. Hopefully, along with my money saving tips and advice, you can reduce your daily expenditure and as a result this will have a snowball effect and you will then be in a position in the future to be able to save.

So, these were my tips on how to invest money wisely. Remember, invest only what you can afford to lose to begin with. This is not the place to put your house deposit in. Invest in companies you trust, but remember to have an emergency fund first – This is non-negotiable.

If you’d like to see more, I share my investment portfolio here and here and you can get started here with a free share worth up to $200 too.

XOXO