Free Stop Wasting Your Life & Do Something by Simon Smith
Authors: Simon Smith
market dips every now and then, this is normal and don’t panic.
Chapter 22
Savings & Investing
The root of your investments will be savings. I’ve said this already, but in order for you to be able to invest, you need some money. In order for you to have some money, you need to save some. In order for you to save some money, you need to not spend it. This means that you need to spend LESS than you MAKE.
Once you’ve sorted out your expenses and are able to put some money aside, you need to do this. You want to aim for ten percent, but if it’s less, at least you’ve started.
So stage one is to actually start. If you don’t take this first step, your financial future is unlikely to ever change.
I’d suggest you set up a standing order or a direct debit so that on payday, your money goes straight out of your account. If you don’t see the money, you A) Won’t miss it, and B) Won’t be tempted to spend it. If you just leave the money in your account for a week or two, I can guarantee that something will come up that needs that money. The washing machine will break down, or you’ll see some gadget that you just have to have.
Save yourself £1,000/$1,000 and then start putting your money into your allocated finance pots. Remember, keep a minimum of 40% in your safety pot.
Set up an online or telephone stock broker account and start investing. You’ll soon learn the ropes of how to place trades, how to purchase funds, and how to sell them.
Now watch them grow or shrink in value, and make your decisions based on what you’re seeing, and how you’re feeling. Remember, just because your share/fund is going down in value, it doesn’t mean the company/fund is becoming less investable. You need to do your research before making buying and selling decisions. There are other books a lot more specific than this one to do this, so I won’t go into too much detail now, but I would just like to explain the concept of dollar cost averaging, as it’s a useful one to understand.
Dollar Cost Averaging
Let’s say that you decide that you will invest £100/$100 every month into a fund on the stock market.
Every month you take your £100/$100 and invest it in the same fund. Some months, the stock market likes your fund so says that each share in your fund is worth £1/$1. This means that on that particular month, you purchase 100 shares.
The following month, there is a national dip in stock prices, but your fund is still just as valuable as it was last month. However, due to the dip in stock prices, your fund is now valued at £0.50/$0.50. That means that this month you have been able to purchase 200 shares in that fund. You now have 300 shares.
The following month there is a bull market, and the shares are up to £2/$2 each. So unfortunately, your £100/$100 only buys you 50 shares this month.
This is the concept of dollar coast averaging. Your money will purchase different quantities of shares each month, depending on the price of your shares. So if the market is lower (providing your fund is still good) you will simply buy more shares in that month. This is one of the ways your holdings will grow over time as over the months and years, the stock should increase in value.
Chapter 23
Pensions
When I was young, I wasn’t really interested in setting up a pension. I thought I was too young, and was never going to get to retirement age. However, that soon changes. Now I wouldn’t be without a pension fund for my retirement.
If you work for a medium to large size company, there is a very good chance that they will have a company pension scheme. Most companies will contribute to your pension, whether or not you put anything in yourself.
What this means in layman’s terms is: THEY WILL GIVE YOU FREE MONEY FOR YOUR RETIREMENT. What a bonus!! All you have to do is sign a few pieces of paper, and they will put a percentage of everything
Chapter 22
Savings & Investing
The root of your investments will be savings. I’ve said this already, but in order for you to be able to invest, you need some money. In order for you to have some money, you need to save some. In order for you to save some money, you need to not spend it. This means that you need to spend LESS than you MAKE.
Once you’ve sorted out your expenses and are able to put some money aside, you need to do this. You want to aim for ten percent, but if it’s less, at least you’ve started.
So stage one is to actually start. If you don’t take this first step, your financial future is unlikely to ever change.
I’d suggest you set up a standing order or a direct debit so that on payday, your money goes straight out of your account. If you don’t see the money, you A) Won’t miss it, and B) Won’t be tempted to spend it. If you just leave the money in your account for a week or two, I can guarantee that something will come up that needs that money. The washing machine will break down, or you’ll see some gadget that you just have to have.
Save yourself £1,000/$1,000 and then start putting your money into your allocated finance pots. Remember, keep a minimum of 40% in your safety pot.
Set up an online or telephone stock broker account and start investing. You’ll soon learn the ropes of how to place trades, how to purchase funds, and how to sell them.
Now watch them grow or shrink in value, and make your decisions based on what you’re seeing, and how you’re feeling. Remember, just because your share/fund is going down in value, it doesn’t mean the company/fund is becoming less investable. You need to do your research before making buying and selling decisions. There are other books a lot more specific than this one to do this, so I won’t go into too much detail now, but I would just like to explain the concept of dollar cost averaging, as it’s a useful one to understand.
Dollar Cost Averaging
Let’s say that you decide that you will invest £100/$100 every month into a fund on the stock market.
Every month you take your £100/$100 and invest it in the same fund. Some months, the stock market likes your fund so says that each share in your fund is worth £1/$1. This means that on that particular month, you purchase 100 shares.
The following month, there is a national dip in stock prices, but your fund is still just as valuable as it was last month. However, due to the dip in stock prices, your fund is now valued at £0.50/$0.50. That means that this month you have been able to purchase 200 shares in that fund. You now have 300 shares.
The following month there is a bull market, and the shares are up to £2/$2 each. So unfortunately, your £100/$100 only buys you 50 shares this month.
This is the concept of dollar coast averaging. Your money will purchase different quantities of shares each month, depending on the price of your shares. So if the market is lower (providing your fund is still good) you will simply buy more shares in that month. This is one of the ways your holdings will grow over time as over the months and years, the stock should increase in value.
Chapter 23
Pensions
When I was young, I wasn’t really interested in setting up a pension. I thought I was too young, and was never going to get to retirement age. However, that soon changes. Now I wouldn’t be without a pension fund for my retirement.
If you work for a medium to large size company, there is a very good chance that they will have a company pension scheme. Most companies will contribute to your pension, whether or not you put anything in yourself.
What this means in layman’s terms is: THEY WILL GIVE YOU FREE MONEY FOR YOUR RETIREMENT. What a bonus!! All you have to do is sign a few pieces of paper, and they will put a percentage of everything
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