Why you should invest today!

Do you want to make money while you sleep? Of course you do! By investing today, you will take the money you have now and put it to work for you. Just think of your investments as your own little employees working hard for you while you sleep. The beauty of investments is that your money will gradually increase over time due to a little concept known as compounding interest, which I will talk about more in a minute.

Retirement plans are going by the wayside. Gone are the days of having a fat check waiting for you when you retire. Times are tough for everyone which means your retirement check isn’t going to be your grandparent’s retirement check. Even if you pension seems like its guaranteed, would it really hurt to put away a few more dollars a month towards your future? You also must consider that social security is shrinking, and analysts predict it will completely run out by 2033.

Compounding Interest

I mentioned compounding interest in the above paragraph. Compounding interest is when you earn interest on your interest. In other words it’s when you make money on the money you made which made money on the money you invested, hence the compounding part.

It’s okay if you are confused. The best way to illustrate compounding interest is to use an example. Let’s take John for example. John just graduated and just started working his first real world job. John also loves Starbucks. He loves Starbucks so much that he goes in every morning before work. He spends $4.85 for a Grande latte at least three times a week, sometimes more. Let’s say John decides to forgo one latte this week and invests the $4.85 in the stock market instead. With the an average return on investments of 10% a year, how would that interest compound over time?

Value Today

In a year

In 5 years

In 10 years

In 25 years

In 40 years

$4.85

$5.36

$7.98

$13.13

$58.48

$260.45

 

By forgoing just one latte today, John can put away that money he saves and build it up to be worth over $58 dollars in 25 years or $260 in 40 years! I know what you’re thinking, $260 isn’t really all that much in the grand scheme of things. So let’s crank it up a notch.

Let’s say John forgoes one latte a month, or 12 lattes a year at $4.85. At the end of every month he puts that $4.85 into the stock market. This is what is known as an annuity.

Value Today

In a year

In 5 years

In 10 years

In 25 years

In 40 years

$4.85

$61.45

$378.70

$1001.78

$6,488.77

$30,927.38

 

John can make over $30,000 by the time he’s 80 by just skipping out on Starbucks once a month! This is the power of a compounding annuity! The point of this example is to illustrate how just a small amount of money put away to day can pay off big time in the long run and how putting away a little bit each month can make your gains multiply even more quickly! 

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Don’t invest until you read this!

You may think making money off the stock market is easy. Just buy low and sell high right? I mean that’s what everyone says so it must be true. And yes, I use this strategy myself as well. But I do not use it as the end all be all golden rule to investing. 

When I am looking to make a short-term gain, I buy good stocks that may be in a little bit of a slump. But this is not how I decide where I want to put my money. I will only invest in a stock I am comfortable with holding for a long period of time. I will never, ever, never, invest in a stock that I don’t know anything about. This is stupid and speculative trading that will only make your wallet lighter. If you buy a stock that you are willing to hold on to for more than a few months (or better yet, years) you are taking a step in the right direction. 

So, once again, ONLY invest in stocks you are willing to stick with for a LONG period of time. Do NOT invest in stocks you know nothing about. Do NOT invest in a stock you thing is a sure thing. You don’t make money off the stock market by day trading. You make money by making smart, long-term investments. 

Stock picks for August 27, 2013

Occasionally I will write posts about stock picks that I think are great opportunities to earn money in the short-run and/or are good stocks to buy a low prices.

My first stock for today is Metlife Inc. (MET). Metlife is a stock that fell $2.07 and  -4.32% today to $45.85. Analysts still have them ranked as a strong buy, I wouldn’t worry about the stock going down too much more. Look at Metlife as an opportunity to make a short-term gain as their prices bounce back.

Discover (DFS) fell $1.98 and -4.03% to $47.21 one day after Visa took a similar tumble. The US housing and jobs markets have been improving, which have spurred an increase in consumer spending. Consumers are going to continue to use credit cards as spending continues to climb upwards.

Intro

Hello there friend. I want to first start off by thanking you and introducing you to my blog. This blog is here for me to compile tips to help you learn about personal finance. My goal is to help my readers become more knowledgable about investment opportunities and share my thoughts on the stock market and personal finance ideas.

A little about me: I am a graduate of the University of Florida with a degree in Accounting but I have always had a strong interest in finance, especially personal finance. The stock market has always been intriging to me and I am always researching personal finance topics. I want to share what I know and what I learn on this blog here so I can help and learn from others who share similar interests as myself!