by Pam on January 24, 2010
We can all learn something about saving and investing from Benjamin Franklin. Upon his death, in his will, he donated one thousand British pounds to both Boston and Philadelphia to be used to help apprentices to start their own businesses. The interesting part of the request was that he wanted the money to be invested for 100 years. After the 100 years was up, the Philadelphia investment had grown to $172,000.00 and Boston’s fund ended up with $2.3 million.
This goes to show you how important a role compounding interest can play in your investments. The more time you have to invest, the more your money will be able to work for you. As well, this lesson from history shows us the importance of choosing investments wisely. Obviously Boston did a lot better job of selecting investments than did Philadelphia.
If you are unsure of what you are currently investing in, or if you haven’t started to save for your retirement, I would encourage you to book an appointment with a Financial Planner at your local financial institution and build a strategy for retirement and your other savings goals. The sooner you make a plan and stick to it, the better off you will be.
For more detailed information on the full story about Benjamin Franklin, check out this article.
by Pam on November 9, 2009
Dollar cost averaging is what you are doing when you contribute to your investments on a periodic basis such as monthly or biweekly, rather than putting down a one-time lump sum. The advantage to dollar cost averaging is that you don’t have to worry about “timing the market”. Instead, you buy units or shares when the market price is both high and low. Over time, this results in a lower average unit price then if you made a lump sum contribution.
You may be doing this inadvertently but many sophisticated investors use this technique as well. Dollar cost averaging helps you to have a positive perspective even when the markets are down, because it means that you are buying units at a cheaper price. It’s important to note, however, that dollar cost averaging is only helpful when you are investing for the long term.
If you are interested in learning more about dollar cost averaging, check out the article at this link.
by Pam on October 30, 2009
Here’s a quick investment tip for you that will help your investments grow. When you set up preauthorized payments towards your investments, it is really important to make sure that you increase your contributions by at least 3% each year to keep up with inflation. Although you may think it’s not necessary, the impact on the growth of your investments is significant. All you need to do is contact the institution that holds your investments once a year and ask them to increase your contributions by a few dollars.
To illustrate my point, if you contribute $250 each month into an investment account for 30 years and you increase your contributions by 3% each year, in 30 years your investment could be worth as much as $341,179. However, if you contribute $250 each month for 30 years and do not increase your contributions to keep pace with inflation, your investment will be worth approximately $243,927, which is almost $100,000 less!
Although inflation is often hard to notice from one year to the next, it becomes very apparent over a timeframe of ten years or more. For example, what cost $100 in 1998 would cost $131.52 in 2008. Also, if you were to buy exactly the same products in 2008 and 1998 they would cost you $100 and $77.68 respectively.
You can find more examples and get a better understanding of the effects of inflation over time by checking out the Inflation Calculator at http://www.westegg.com/inflation/.
Don’t forget to give your financial institution a call in order to increase your contribution amounts. You won’t even miss the extra couple of dollars you contribute, and your investments will grow a lot more as a result.
by Pam on October 18, 2009
I’ve just started reading Multiple Streams of Income
by Robert G. Allen. So far I am really enjoying it. The first chapter is all about the importance of consistently saving. He talks about how one dollar can be used to start growing a money tree and the author includes many charts indicating potential growth over the long term.
His main point is that anyone can become a millionaire if they are disciplined enough to save and invest wisely. Like I emphasized in my last post about investing when you’re young, you don’t have to have a lot of money to start investing. The best time is to start now.
Instead of me writing a lot about this chapter, I would recommend that you check out this link: http://multiplestreamsofincome.com/ and read the chapter for free online. To get to the free chapter, click on Keyword Search on the left hand side of the site. From the drop down menu, select Free Chapter and click the Go button. I bet you will never think of investing the same way again! The author emphasizes in a very practical and profound way just how important it is to save for tomorrow today.
by Pam on October 16, 2009
This is written especially for those of you who have just finished high school or university. I highly recommend that you start to tuck some money away for your future. Whether you want to save up for your first home, a trip around the world, or for retirement, the time to start saving is now. I know it’s hard to be thinking about retirement when you’re so young, but believe me, time goes by really fast and before you know it, you will be thinking about your retirement plans.
If you’re like me, you ignored this advice and didn’t start saving until your mid 20s. Although it’s better than nothing, it’s ideal if you start paying yourself first when you’re young. I emphasize this because your investments’ growth potential increases dramatically the longer you keep your funds invested.
For example, if you invest $10,000.00 when you’re 18 years old and don’t touch it until you are 65, assuming an average rate of return of 7%, the value of your investment will be around $240,000. By contrast, if you invest the same amount at age 25, assuming the same rate of return, the value at age 65 will be approximately $150,000. So, by investing 7 years earlier, the end result is about $90,000 extra dollars in your pocket at retirement.
Although it may seem difficult or even impossible to start saving for retirement at such a young age, I can guarantee that it is worth it and you won’t regret it. Many financial institutions will allow you to start investing with a minimal amount of money and then you can continuously build up your accounts by setting up preauthorized payments that are within your budget.
You don’t have to have a lot of money to start investing. Don’t put it off until you are older. It’s time to start investing today as the more time you spend in the market, the more growth you will see and the more likely you will be able to achieve your goals.
by Pam on September 28, 2009
If you are working on developing your investment knowledge and are attempting to read financial articles, you will likely need help in learning all the investment terminology. I find Investopedia.com’s dictionary extremely helpful in explaining investment jargon.
Not only does the site provide a definition, it also provides an explanation to further your understanding.
For example, when I looked up the word “bond”, this is what I found in the Investopedia.com dictionary:
“What Does Bond Mean?
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.
Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents..
Investopedia explains Bond
The indebted entity (issuer) issues a bond that states the interest rate(coupon) that will be paid and when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds is usually paid every six months (semi-annually). The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, notes and bills, which are collectively referred to as simply “Treasuries”.
Two features of a bond – credit quality and duration – are the principal determinants of a bond’s interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipals are typically in the three to 10-year range.”
So, as you can see, this site can be extremely helpful for anyone who is unfamiliar with investment terminology. Check it out and before long you will be much more confident when you read about investments. It is always a good idea to understand how your money is being invested, even if you have a managed portfolio through your financial institution.
Grow Your Money; 101 Easy Tips To Plan, Save, And Invest by Jonathan D. Pond
Grow Your Money
is written by an expert financial planner and it contains advice on everything from budgeting to investing to estate planning. It is geared towards Americans because it has in depth sections on the various types of IRAs and other American financial products, however, this book covers many other topics that are not specific to any particular country such as accumulating wealth, home renovations, and getting out of debt, to name a few.
I like the layout of the book and how the author makes complicated topics easy to understand. He breaks the book down into sections each pertaining to a single idea so that you can easily find the topics that interest you. There are some interesting quizzes throughout the book to help you to determine what kind of investor you are, and whether you are a spender or a saver. I especially like the famous quotes he has on about every second page.
I would recommend this book to anyone who wants to learn more about saving and investing their money, especially for Americans as there is a lot of great information about Roth and Traditional IRAs, SEP-IRAs, and 401(k) plans.
We can all learn something about saving and investing from Benjamin Franklin. Upon his death, in his will, he donated one thousand British pounds to both Boston and Philadelphia to be used to help apprentices to start their own businesses. The interesting part of the request was that he wanted the money to be invested for 100 years. After the 100 years was up, the Philadelphia investment had grown to $172,000.00 and Boston’s fund ended up with $2.3 million.
