Mind your money: Start investing in 2024, no matter your income

Many believe you need wealth to invest, but the truth is, investing builds wealth. Despite a record 55 per cent of Americans owning stocks, 45 per cent still don’t. The number is underwhelming for other countries like for the UK only 33 per cent , China 13 per cent, and merely 3 per cent for India. Let’s debunk the myth that investing is only for the wealthy and explore how you can start investing in 2024, regardless of your current financial status.

Start small, start now: Investing doesn’t require large sums. With lower fees and easier access to investment options, it’s easier than ever to begin. Consider automating a portion of your salary towards a long-term investment, even if it’s just Dh100 per month. Starting small is key, and you can always increase your contributions over time.

Follow the 50/30/20 rule: Allocate 50 per cent of your income to needs and obligations, 30 per cent to savings and debt repayment, and 20 per cent to investments. As your income grows, increase the proportion allocated to investments from 20 per cent to 50 per cent.

Invest for financial freedom: Investing is essential for financial freedom. While the stock market may seem intimidating, not investing is a greater risk. Real estate and business ownership are also ways to build wealth, but all paths include investing in some form.

Leverage compound interest: The earlier you start investing, the more compound interest works in your favour. Saving Dh1,000 per month from age 30 to 65 could accumulate to approximately Dh3.25 million, versus Dh1,180,000 if you start at age 40. Time is your ally in building wealth. As you can see, waiting just 10 years can result in losing about 64 per cent of your net worth. The gap gets wider the longer you wait.

Personal story

When I had just graduated college, my first manager and a mentor — a friend to this day — sat down with me and suggested I automate a part of my salary towards a mutual fund for the long term. It’s been 15 years since then, and I took her advice to heart. I set up a monthly recurring contribution for just Dh100. I paid a 5.75 per cent upfront sales charge and approximately 2.25 per cent in ongoing internal fees for the high-cost mutual fund I was sold. Fortunately, most upfront sales charges can be avoided today, and internal mutual fund fees have decreased. Connect with me and I can guide you on low cost, high quality ETF’s, Mutual Funds, Index Funds etc

The Dh100 per month I put into a recurring contribution was less than Dh3.33 ($1) daily. Anyone reading this post should be able to find a way to come up with $1 per day. No matter how small you start, the most important thing is to start investing. Over time, you can always increase the amount you contribute each month. These days, I’m saving way more than Dh100 per month. However, it took time to grow my savings rate to its current level.

To get started investing, pick a strategy based on the amount you’ll invest, the timelines for your investment goals and the amount of risk that makes sense for you.

Here is my six-step guide to start investing

1. Engage an adviser : I say this out of experience, engage with an adviser who will guide you appropriately towards a financial discipline to achieve your financial objectives

2. Start early: Time is crucial in investing. Begin as soon as possible to maximise the benefits of compound interest.

3. Decide your investment amount: Determine an amount you can comfortably invest each month, no matter how small.

4. Be mindful of the associated costs: Choose an investment platform that suits your needs and budget, and be mindful of the costs associated with buy/holding and redeeming investments.

5. Choose a strategy: Research and select an investment strategy aligned with your goals and risk tolerance.

6. Educate yourself: Understand your investment options to make informed decisions.

Remember, the journey to financial freedom begins with a single step. Start investing today, and take control of your financial future.

Sandeep S. Jadwani - ACSI, CIB (Head of Investment Advisory, Habib Investment Limited – Regulated by DFSA) is qualified, experienced and an award-winning financial adviser to High Net-worth Individuals. Been in the UAE for over 15 years and guiding individuals to efficiently and effectively manage their finances to achieve their financial goals. Connect with him on Instagram @sandeep_investmentadvisor

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