Investing 101
So you’ve heard a whisper about the power of investing and you want to get your head around exactly what is could mean for you. We’re here to spill the beans and we can’t wait to introduce you to the 8th wonder of the world (according to Albert Einstein)!
This blog is probably going to leave you experiencing two pretty conflicting emotions, firstly, we bet you’ll be pretty annoyed no one has let you in on this little secret and secondly, like us, you’ll finish itching to make your money start working for YOU.
At Zella, we like to keep things simple and we understand each person is on a unique journey. Whether you’re 25, 35 or 45, it’s never too late to take control of your financial journey and realise your goals, whatever they may be.
We aim to arm you with knowledge and confidence to manage your financial journey by introducing you to the foundations of investment.
What is investing?
“Money makes money. And the money that makes money, makes money”, Benjamin Franklin. Basically, investing is where you commit an amount of money or capital towards an asset or investment over a long period of time in order to make a profit. It means making smart decisions about your money and being in it consistently, for the long haul. This is where compound interest (or return) comes into play.
Compound Return vs. Simple Return
Explaining the difference between compound return and simple return will help you realise why simple interest is so, well, simple!
Simple interest is where you earn interest only on the initial sum of money. Compound return is where interest that you earn on a sum of money is re-invested so that you earn interest on the initial amount of money, plus interest on the interest. You can see below just how that plays out, with an initial investment of $10,000 at an interest rate of 7%.
Don’t be fooled
The biggest perceived barrier to the 8th wonder of the world is that young people don’t believe they have enough money to begin investing or they think they need to work to save up a decent lump sum to get started. Don’t be fooled – it’s never too early to start and delaying until you believe you have enough money is not always the best approach.
So what do I invest in?
Typically, people choose to invest in property or shares, although there are countless options. It pretty much comes down to what works best for you and what you’re interested in, however, there are advantages and disadvantages to every type of investment.
Let’s do the maths
If you invest $500 per month over 40 years at a conservative 7% interest rate you will finish up with a neat $1.31 million*.
Our number one tip?
Invest early. Invest consistently.
If investing is on your radar get in touch with one of our financial advisers and find out what you could achieve.
*This advice is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances before deciding whether to act on it.