Where To Invest

So you've decided to sort your finances out some way or another, this might be risking your hard earned cash by investing in potentially profitable ventures, or a simple savings plan, which ever it is, make sure you make use of the tool that investors call compounding.

Compounding is the affect of leaving enough of the initial investment where it is, so that it will keep growing year on year, take out to little, and there is no point investing in the first place, you'll get bored and blow the whole lot. On the other hand, take out to much and what was compounding and starting to give you a small return year on year will be gone for ever.

There are two main traps that are associated with storing money:

1. Not letting the benefits of compounding take place
2. Not reaping the benefits of compounding

I will go as far as assuming that the number 1 relates to the average savings account. You decide you want to sort your finances out, whether that is a sideline, to pay off a loan, or to even pay off your mortgage. You start out with enthusiasm, and keep saving you aim of £50 per week.

What happens then is most savings accounts start to see a nice balance accruing, which is gaining minimal amounts of interest every year, the owner of the funds realizes that the £3,500 in the bank, that they have saved, on top of the sale of their current car, would get them that convertible they have been dieing for!

They proceed to blow their savings and never have the will power to read an article like this again!
Number 2 is slightly different. Most investors are so hung up on making money; they never structure a plan that will allow them to release equity from their portfolio for themselves. Sure they increase the value on a property, sure they make wise investments in businesses, but all they do is re invest and re invest until there is nothing left to invest in, or there is no time for them to reap the benefits of the empire they have created.

Use an effective money management strategy that suits you. Set goals for what you want to achieve.

If we use this as a following scenario:

If you made a series of investments over five years, which were on the same date, once every year, and created a 10% return every year on average, £5,000 investment every year, you'd have £30,525 in the final year of your investments, after investing £25,000.

This in its self isn't particularly impressive, but at this level, you can start to reap your rewards slowly, or carry on investing. Your profit for year 6 would obviously be £2,500 meaning you could take £104 per month as an income, and still be compounding and increasing your income every month for life, as your compounded bank balance increases, you increase your 'payment' or 'profit' to yourself.