A goal is nothing more than a dream with a time limit. – Joe L. Griffith (photo no. 1)
In the previous entry, I briefly discussed what investing is, how to invest, what to invest in and what to choose – investing or saving. I think I have made my point quite clear, so I hope you have found a lot of useful information there. In this section, I will try to focus on the specifics and discuss the following: What are the benefits of investing? There will be a little bit of theory, but also some examples from life.
Insanity is doing the same thing over and over again and expecting different results – Albert Einstein (photo no. 2)
First, you must convince yourself – why should you invest?
You probably hear the following comments from those you love from time to time: “You should be moving forwards, not standing still” or “Finally do something with your life”. When we first met, Monica kept on pestering me with such comments. Now that I mention it, I’m not surprised at all – she was a manager working for a thriving company, while I was a young journalist who was endlessly swapping editorial offices. Heaven knows what she saw in me then. Maybe it was my spontaneity, who knows? What I did know was that she couldn’t stand my eternal irresponsibility. I remember how she once told me during one of our arguments: “If you want us to be together for real, you have to stop behaving like a kid!” At that time I thought that she wanted to keep me under her thumb, but now I know it was one of the most important pieces of advice I have ever received.
All right, but what does this have to do with anything and let’s get back to the question: “What are the benefits of investing?” In my opinion, investing is taking responsibility for yourself, your family and your loved ones. You can work all your life, put money aside to buy a car, pay your social insurance contributions, hope that your doctor sees you one day and your pension is not squandered by those in authority. Or you can start thinking about the future now and look for ways to earn extra money. That’s what investing is for me: a chance to earn extra money and the possibility of securing your financial future.
However, let’s remember one thing which I will repeat on numerous occasions – before we throw our money into the market, let’s first find out how to make investments. Here are some examples.
Make money on companies, or why should you invest in shares?
One way to invest is investing in shares. How does this work?
Suppose we have an extra GBP 300 in our pocket, which we would like to multiply. We also have three friends who have started their own businesses, but they lack the funds to keep their companies going. After a thorough study of the corporate information they provided us with, we are aware of what they are doing. We also know that each of them has the right approach to work. They have a future ahead of them, so we divide our GBP 300 and give each of them one hundred pounds. At this point, we become investors. Our colleagues give us an insight into their business, so we know if and how they are developing. If one of them doesn’t keep up, and during this time our fourth colleague also starts a company, then we can also give him GBP 100. However, we have no reason to fear that suddenly we will lose all our money because we have invested all of GBP 300. During all this time, each of our friends who received money from us pays us dividends, i.e. additional funds. And that’s more or less how it works. Why invest in shares? Because:
- we have a chance to make a profit that grows over time, i.e. the money we have invested can be recovered with a considerable surplus,
- trading in shares is flexible, i.e. we can invest in various assets, and if we decide that we don’t like them, we can sell them and buy other shares,
- we have the opportunity to look into the investment, so at any time we know in which direction the company is developing
- we receive dividend payments, i.e. remuneration from the company for the fact that we have invested in it
Buy and make money on an apartment, or why should you invest in real property?
Stocks are not everything, we can also invest in real property. It looks like this:
Let’s imagine that we have put some money aside and suddenly we hear that we can buy an apartment at a bargain price. We decide to buy this apartment after very little deliberation and… what now? There are many choices we can make. We can rent this new apartment, which will bring us a steady income. It can be used as security to get us quite a substantial credit loan. We can also sell it in the near future at a much higher price. Another solution is to keep the apartment as a place where we will live in the future, which provides us with a feeling of security. So why invest in real property? Because:
- they make it possible to secure capital, i.e. real property can be used to secure our money
- they generate passive income, i.e. properly used properties can bring us regular profit
- they make it possible to obtain tax reliefs, i.e. when buying real property and knowing tax regulations, we can get bigger tax exemptions from the state
- we can sell it later at a higher price if we buy real property for a low price,
There is nothing more powerful than an idea whose time has come – Don Tapscott (photo no. 3)
It’s great elsewhere, but there’s no place like home, or why invest in the UK?
The investment market is huge, which gives us a large area in which we can invest money. How should we relate it to British and foreign situation?
Let’s say that our friends founded a streetwear company which manufactures clothes that are not inferior in quality to foreign brands. They are good, but they have not yet developed such a well-known logo as Reebok, NIKE or Adidas. Now, if we want to buy a sweatshirt, we have a choice of buying either clothes from our friends or from a well-known brand. When we buy a sweatshirt from our friends, we know that we are investing in their development, because the GBP 40 that we will spend on clothes can be used to buy new materials, hire a young designer or pay the accountant. In short, it will go on advancing the company. A growing company is a company that is also paying its taxes, which we all take advantage of. When we buy a foreign sweatshirt, the system will be similar, except that we will support the foreign market and it won’t be us who will benefit from the taxes paid. Why invest in the UK?
• because this is how we develop our own regional market
• the larger the number of successful companies, the better the economy and, thus, the more money we can benefit from.
Monica always tells me to think ahead, not to live solely in the present, to be more responsible and, above all, to stop behaving like a kid! The last phrase I still hear quite often. But however moralistic it sounds, it makes me know that it is very important to find a balance in life. That’s why I think it’s worth investing to make money for our whims, but most of all to think about our future.