Guide to Investing: How To Grow Your Wealth Wisely

Have you ever wondered how you can make your money work for you? Whether you’re saving up for a house, your child’s education, or an early retirement, investing is one of the best ways to grow your wealth.

For many, investing seems complicated and risky. The good news is that it doesn’t have to be! This guide will explain the basics of investing in a simple and easy-to-understand way.

Investing is simply putting your money into something that has the potential to grow over time. Unlike saving, which keeps your money idle in a bank, investing helps your money increase in value faster than inflation, thanks to compound interest and market growth.

The earlier you start, the better! Even small amounts invested regularly can make a big difference in the long run.

Before diving into the different types of investments, let’s talk about some basic principles:

• Investment Risk: All investments have risk. The higher the potential return, the higher the risk. There is no such thing as a zero-risk investment. Choose investments that are within your comfort level or risk tolerance.
• Compounding: When your earnings generate more earnings over time. It’s money working for you. This is why starting early is important.
• Liquidity: How quickly you can turn your investment into cash. Stocks are more liquid than real estate, for example.
• Diversification: Don’t put all your eggs in one basket. Invest in different assets to reduce your risk and have steady returns.
• Market Volatility: The value of investments changes often, and their prices fluctuate. The key is to stay invested long-term and not panic when the market dips.

Investing is a journey. Start with building a solid financial foundation and keep these in mind:

Establish an emergency fund before investing.
Before investing, save at least 6 months’ worth of expenses for your emergency fund. Put it in a savings account so the money is always available when needed.

Set clear financial goals.
Are you investing for retirement, a car, or a business? Your goals will determine your investment strategy. Having one will also keep you motivated to invest regularly.

Know your risk tolerance.
Some people are comfortable with high risks, while others prefer stability. Choose investments that match your personality.

Invest only in reputable financial institutions.
Avoid investment scams by investing only in reputable financial institutions, such as banks, SEC-accredited investment companies, and secure online platforms. Research before investing. 

Now, let’s look at some of the most common investments:

Stocks
You can buy shares of a company on the stock market, becoming a part-owner. Stocks can offer high returns but can also be risky due to market fluctuations. Invest in stocks through a stockbroker.

Bonds
You give these loans to companies or the government in exchange for interest over time. They are generally safer than stocks but have lower returns. Invest in bonds through banks.

Mutual Funds
A pool of money from different investors managed by professionals. These funds invest in stocks, bonds, or both, giving you diversification. Invest in mutual funds through banks and investment companies.

Real Estate
Buying property can be an excellent long-term investment, whether for rental income or selling later at a higher price. The key to successful real estate investing is choosing a good location. Deal only with reputable real estate developers.

Alternative Investments
Recommended for advanced investors, you can invest in art, collectibles, gold, cryptocurrencies, and other non-traditional assets.

Start as early as possible.
Time is your ally when it comes to investing. The longer your money is invested, the more it can grow. Even investing small amounts can grow into a significant sum after many years.

Stay informed and continue learning.
Read about financial news and market trends. Understand business and economic terms by attending seminars, watching educational videos online, and following trusted investment experts.  

Avoid emotional investing.
Stay calm and stick to your strategy, even when the market is unpredictable. Don’t panic when the market goes down. Always think long-term.

Review your portfolio regularly.
Check your investments at least once a year to see if they still align with your goals. If an asset is underperforming, consider transferring it to another investment. If an investment is doing well, consider investing more money in it.

Do not time the market. 
No one can predict precisely when prices will rise or fall. Instead, focus on consistency. Use peso-cost averaging and invest a fixed amount regularly to reduce the impact of market fluctuations.  

Learning how to invest money is one of the best ways to build wealth and achieve financial freedom. While it may seem overwhelming initially, taking small, smart steps can lead to big rewards in the future. The key is to start today, stay consistent, and keep learning. 

As the financial ally of Filipinos, Home Credit provides world-class financial inclusion to help you achieve your goals. Get tips on managing your finances and more on the Home Credit app, available on the Apple App Store and Google Play Store. 

About the author: Fitz Gerard Villafuerte is a civil engineer who decided to quit the corporate world back in 2003 to pursue freelancing and entrepreneurship. You can read more financial tips on his blog, Ready To Be Rich, which has won several awards including the Best Business and Finance Blog at the Philippine Blog Awards. He is recognized by Moneysense Magazine as among the Top 12 Most Influential People in Personal Finance in the Philippines. He is an author; an online content creator; a Registered Financial Planner; a resource guest for various television and radio programs; and a corporate speaker and trainer for several socio-civic organizations in the country. Lastly, he is the President of Wealth Arki, Inc., an investment consultancy, and financial planning firm that helps Filipino families achieve their financial goals.