I love investing as a personal finance topic, specifically long-term investing. I understand the fear of investing one’s hard-earned money is common due to inevitable risks such as stock market downturns and other meltdowns involving certain investment assets. Losing one’s capital is certainly the last thing an investor wants to happen in his investment portfolio.

Additionally, ordinary people generally do not have the idle funds to invest. Investing is out of one’s priorities due to financial illiteracy. These restraining factors prevent people from saving their hard-earned money.

When I was just starting my investment journey, I also had the qualms of pouring my hard-earned funds into stocks and share capital common and preferred similar to other novice investors. Being a conservative investor, I understand that nothing is risk-free, and I can lose part of or all my capital or investment funds anytime. Moreover, I did not like the long period when I cannot access and spend my money.

Nonetheless, I realized that I would get old and at that stage in the future, I will need money — lots of it still — to finance and continue my ever-comfortable lifestyle. I encountered a Deutsche Bank social media post in 2019 which says, “The longer you live, the more money you’ll need!” I agree. Existing involves financing one’s needs and wants.

Additionally, I took part in an educational webinar regarding Japan’s intent to become a global financial center last year. I learned from that event that investors should not be afraid to invest their hard-earned money for the long-term. The Daiwa Asset Management Company Limited executive who recommended this useful measure explained that this technique lets people enjoy high returns on their investments.

Furthermore, inflation is a fact of life. My purchasing power with the money I saved dwindles as years go by. Thus, it is quite important that I invest some of my hard-earned money. It is wrong to just keep all of my savings in commercial banks where they merely earn regular interest rates that are a pittance.

I absolutely do not want to suffer the consequences of failing to invest and consequently living hand-to-mouth in my greying years ! Indeed, I surely have got the power today to avoid these undesirable financial events from happening in my dear life. Therefore, I am now focusing on growing both my savings and investment to enjoy my continuous prosperity and a comfortable retirement in the future.

Besides the articles I wrote and compiled regarding investing and long-term investing I enumerated above, I also want to include the following references for my perusal and enrichment of my investing knowledge:

Article #1: If you don’t invest, you’ll never get to retire: Investing May Help You Retire Comfortably (Pru Life UK)

Everyone needs to stop working eventually. This means that there will come a point in time when your income will have to come from something other than your job. In an ideal world, we would all have started planning for old age the moment we received our first salary. Unfortunately, preparing for a financially comfortable retirement is not a priority for most of us.

According to a survey by The Global Aging Institute (GAI), in partnership with PruLife UK, as much as 90 percent of Filipinos worry about not meeting their financial needs upon retirement1. The study also revealed that “only 68 percent of Filipino workers expect to receive Social Security System or Pag-IBIG Fund benefits when they retire, while just eight percent expect to receive income from financial assets like insurance or annuity products and stocks, bonds, or mutual funds.”

This lack of money skills and financial literacy is a very expensive problem. Many of us think that savings in the bank or government benefits are enough to sustain our financial needs upon retirement. Even worse, some simply adopt the “bahala na” attitude and burden their children to take care of all their expenses. Too often, Filipinos go into retirement without a concrete plan. Some are even forced to work even if they are beyond the retirement age because they need income.

Savings and inflation

Putting your retirement money in the bank is not entirely bad. It’s important to have some cash for emergencies and short-term needs. However, inflation will eat up your savings as years go by. Inflation is the rapid increase in prices over months or years2. Let’s say you set aside one million pesos today for your retirement. The same one million pesos will no longer have the same value twenty years from now.

The average inflation rate in the Philippines is 3.18%3. However, most time deposit accounts in the country offer only less than 2% interest. This means that if you put all your retirement money in the bank, you lose purchasing power because of inflation. To keep the value of your money, it’s important to look for options that will give you higher returns — here’s where investments come in.

Crafting your retirement plan

How do you start creating a retirement plan that is more strategic than just putting money in the bank? You have to know what age you want to retire and your ideal income during retirement.

Your expenses in old age will be different from your expenses today but you can base your retirement needs on your projected level of spending. Imagine the kind of life you’ll be living. For example, your children might be grown up by then, and you’ll no longer need to support them. Ideally, you should have also finished paying off your house amortization and debts. Work-related expenses will also disappear. However, there might be additional expenses that you don’t have today such as prescription medicines, additional household help for chores you can no longer do, and maybe you’d want a little allowance for hobbies and travel.

Look at your current lifestyle and determine how much you spend monthly. Pay special attention to recurring expenses such as utilities, grocery bills, rent and medical but also consider the variable amounts you spend on weekend mall trips, grooming needs, and gifts.

Preparing a good retirement plan should be a priority.

According to the Philippine Statistics Authority4, the average annual family expenditure for 2015 is at PHP 215,000. A widely accepted financial advice says that you need 70% of your income to maintain your current lifestyle, which means you need PHP 150,000 a year upon retirement. This doesn’t even take into account inflation yet.

After you stop working, you don’t know how long you will live. But you need at least PHP 150,000 a year as long as you’re alive. One approach you can explore is to live off the interest of your investments. This way, you won’t worry about running out of money if you live longer than what you planned for. If you need PHP 150,000 a year, and make investments with a 4% interest*, 150,000 divided by .04 shows that you need to come up with an investment that has PHP 3,750,000 interest for a comfortable retirement.

Determine how many more years you have before you retire. This is the time you have to come up with your 6 million capital. Also, remember that returns from investments are not guaranteed, so give yourself a little buffer.

Diversification and managing risks

“Don’t put all your eggs in one basket,” they say. Diversification5 is one of the oldest concepts in investment. It simply means knowing to spread your investments in different options to help manage risks.

Whether you’re a “conservative” person who can’t afford to lose your initial capital or someone who can take on bigger risks, there’s an investment option for you. Money market funds, time deposits, and government bonds are examples of “safer options” while the stock market, currency trading, and cryptocurrency are examples of “riskier” ones. Ideally, a financial adviser, can create an investment portfolio that reflects you risk appetite and time horizon. Don’t forget to invest in insurance products that can help take care of hospitalization bills when an unexpected illness strikes.

Many of us think that we can start investing for retirement at 50 years old, when all the kids are nearly done with college. However, this is a poor strategy because time is an important element that will help your money grow better. Don’t wait too long before you start planning.

You are not just planning for yourself

In most Filipino households, conversations around money, retirement, poor health, and growing old are often avoided. Parents rarely talk about their investments or debts or savings. Their children become blindsided when their parents get sick and hospital bills start piling up. Siblings argue about who should take care of a parent who needs financial support.

It may be uncomfortable to talk about money and retirement, but being more open about things like this at home can help build a stronger financial foundation that can benefit the entire family. While children should never be considered as a retirement plan, most of them would lovingly help out when they can. But it’s important to let them understand the situation to help them prepare for what can happen.

Planning your retirement is not just about the money. It’s about having the ability to enjoy old age without burdening your children and other relatives who should be concentrating on saving up for their own families. It’s about being financially independent and being in control of your life even when you are no longer earning money from work. It’s about peace of mind and confidence that you can happily spend your retirement years with less worries.

*As mandated by the Insurance Commission, investment-link insurance products need to show projected earning rates at Low (4%), Medium (8%), and High (10%)

Sources:

https://www.prulifeuk.com.ph/en/explore-pulse/health-financial-wellness/if-you-dont-invest-you-wil-never-get-to-retire/

1 Pru Life UK. Ninety percent of Filipino workers worry about being poor upon retirement.

2 Business Dictionary. Inflation definition.

3 Statista. Inflation rate in the Philippines.

4 Philippine Statistics Authority. Average Family Income in 2015.

5 CNBC. Diversification: The oldest trick in the investment book. Paul Ruedi.

Article #2: Here’s How Much Money You Lose by Not Investing (From TheBalanceMoney.com)

By Eric Rosenberg, March 30, 2022

Investing is an essential part of any financial plan. Unfortunately, many people don’t invest their savings, offering a wide range of excuses for keeping their money out of the market.

This can be crippling to your long-term financial health. Take a look at some numbers so you can see exactly what you lose by not investing.

You Will Need Funds in Retirement

Before we get into the details of what you lose by not investing, it is important to understand your needs in the future. For most people, the biggest financial milestone is the day you walk out of work and don’t return. But from that day forward, you are still responsible to pay your expenses, even as your paychecks have ceased.

Pensions are fading into memory, and most Millennials have never had one. Social Security is great, but hardly covers the basics needs of many retirees, particularly if you want to maintain the same standard of living in retirement.

When you retire, you will still have to pay for food, clothing, and any other living expenses, but likely on a smaller budget. To make up the difference in income, you will need a retirement fund. And without investing, that retirement fund almost certainly won’t grow enough to support your retirement income needs.

The Cost of Not Investing $20 per Month

Many people say they don’t have enough money to invest, but you don’t need to save hundreds or thousands of dollars per month to make it worthwhile. Just saving a little bit adds up. Let’s look at what $20 becomes over time if you were to invest it.

Before interest, $20 per month adds up to $240 per year. Over 25 years, that is $6,000. That alone is a nice little bit of cash, but thanks to the power of the stock market it can be worth quite a bit more. If you were to invest the $240 at the end of every year for 25 years and earn 10% — roughly the annual return of the S&P 500 over time — you would have $23,603 at the end.1 If you were to invest the $20 automatically every month instead of at the end of the year, you would have $26,537 at the end of 25 years.

The cost of not investing $20 per month over the course of your career is over $20,000! This isn’t chump change. Imagine how far $20,000 goes in retirement. For many people, that is half a year’s income.

Even if you put your money in a savings account, you are losing out compared to investing in the markets. The best savings account interest rates today are around 1%; at the end of 25 years saving $20 per month at the beginning of every month, you would have $6,819.08. That is more than $800 more than just stuffing it under the mattress, but still five figures short of what you’d get by investing in the markets.

Still, even that $26,000 will only go so far in retirement. So let’s see what happens when you’re investing more than $20 a month.

The Cost of Not Investing Grows With Your Ability to Save

Odds are you spend at least $70 per month on something you don’t really need. I used to get cable TV, for example, but then decided it wasn’t worth $70 per month to zone out in front of the boob tube. If you were to cancel cable and invest $70 per month, you would end 25 years of investing with $92,878 — again, assuming an average annual return of 10% per year, compounded monthly.

Of course, inflation means that $92,878 won’t go nearly as far in 25 years as it does today. So let’s take it even further. If you were to invest $500 per month in an IRA or Roth IRA, you would hit the maximum $6,000 annual limit imposed by the IRS for 2021.2 Invest that $6,000 per year for 25 years at the average return of the S&P 500, you would have $663,416.70.

Now we’re talking! This is still below what many people need to retire, but it puts you well on the way.

Don’t Lose out by Ignoring the Power of Investing

Even Warren Buffet started with his first investment. You can come up with a laundry list of reasons not to invest, but I can give you 20,000 reasons you should start investing at least $20 per month — and even more reasons to invest even more.

Every day you wait to invest, you are losing out. Stop losing and start making. Your money won’t earn you anything unless you put it to work.

Source:

https://www.thebalancemoney.com/money-lost-by-not-investing-4145458

Article #3: Why Should I Consider Investing? The Importance of Investing at Any Age (From Investopedia)

By Alan Farley, September 28, 2022

Investing is an effective way to have your money work for you and build wealth. Holding cash and bank savings accounts are considered safe strategies, but investing your money allows it to grow in value over time with the benefit of compounding and long-term growth.

Whether you invest in stocks, bonds, mutual funds, options, futures, precious metals, real estate, or small businesses, investing is important to generate future income, increase value and equity, and build wealth.

KEY TAKEAWAYS

Investing is an effective way to have your money work for you and build wealth.
Investments may include a range of choices, including stocks, bonds, mutual funds, exchange-traded funds, and real estate.1
An individual’s investment goals depend on their income, age, and risk tolerance.

Why Investing Is Important at Any Age

An individual’s goals depend on a host of factors that may include age, income, and risk profiles. Age can be further subdivided into the following three categories:

Young and starting in a career
Middle-aged and family-building
Retirement age and self-directed

These segments often miss their marks at the appropriate age, with middle-aged folks considering investments for the first time or the elderly forced to budget, employing the discipline they lacked as young adults.

Income provides the natural starting point for investment planning because you can’t invest what you don’t have. A young adult’s first job issues a wake-up call, forcing decisions about IRA contributions, savings, or money market accounts, and the sacrifices needed to balance growing affluence with the desire for gratification. Don’t worry too much about setbacks during this period, like getting overwhelmed by student loans and car payments, or forgetting that your parents no longer pay the monthly credit card bill.

Outlook defines the playing field on which we operate during our lifetimes and the choices that impact wealth management. Family planning sits at the top of this list for many individuals, with couples figuring out how many kids they want, where they want to live, and how much money is needed to accomplish those goals. Career expectations often complicate these calculations, with the highly-educated enjoying increased earning power while those stuck in low-level jobs are forced to cut back to make ends meet.

It’s never too late to become an investor. You may be well into middle age before realizing that life is moving quickly, requiring a plan to deal with old age and retirement. Fear can take control if waiting too long to set investment goals, but that should go away once you set the plan into motion. Remember that all investments start with the first dollar, whatever your age, income, or outlook. That said, those investing for decades have the advantage, with growing wealth allowing them to enjoy the lifestyle that others cannot afford.

Important: Whether your goal is to send your kids to college or to retire on a yacht in the Mediterranean, investing is essential in reaching your financial objectives in life.

Source:

https://www.investopedia.com/ask/answers/why-should-i-invest/

Article 4: Fear of Investing (From the North American Securities Administrators Association/Nasaa.org)

Millennial Money Mission: Millennial Fear of Investing — Where do I start?

Millennials face one of the most uncertain economic futures of any generation since the Great Depression. Many Millennials came of age or entered the workforce during the Great Recession, and as a result have started their careers at lower salaries or not in their preferred field of work. Compound this with the fact that Millennials carry more debt in the form of student loans than any prior generation, and it’s easy to see why some (not all) might be nervous about putting their hard earned savings into an investment that carries any degree of risk. However, not investing while time is on your side could make for a difficult road to retirement. Below are the top three myths Millennials need to stop believing about investing for their future selves.

Myth 1: I don’t have enough money to start investing.

“The journey of a thousand miles begins with a single step.” (Lao Tsu, Chinese Philosopher)

Can you put aside $5 a week? $10 a week? Then congratulations! You have enough money to start investing for your future goals, whether that includes a home, wedding, or more flexible lifestyle. You might be able to find even more to invest by taking a look at your budget. (Don’t have a budget? Check out our Millennial Money Mission post on how to budget for your necessities and build up an emergency fund.)

There are many brokerage firms and trading platforms available to you with no minimum deposit required. These firms often offer investment options with low or no commissions or management fees. Many of these firms also offer investing apps for your smartphone. For more information on these apps, please see Millennial Money Mission post on [smartphone investing apps]. If you think $5 a week is too little, remember, compound interest and time are on your side, no matter how small you start (for more on the magic of compounding and time, check out Millennial Money Mission post on Compound Interest). Remember, before placing your money with any broker-dealer, make sure they are registered by checking BrokerCheck or by contacting your state or provincial securities regulator.

Take Action:

Automate your investing. If you’re paid bi-weekly and have $20 deducted from your paycheck before it hits your bank account, you’ll have over $500 to invest over the course of the year, and you won’t miss it because you won’t see it. If your employer offers a 401(k) or Registered Retirement Savings Plan (RRSP) or pension, invest in it, even if it’s a small amount. You won’t miss 1% of your paycheck if you never “see” it.

Myth 2: I don’t know enough about investing — I have no idea which stock to pick.

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” (Warren Buffett)

You don’t have to pick stocks if you don’t feel comfortable researching the financial health and history of individual companies. There are many investment products that enable you to invest in broad sectors of the market with little or no fees. These products allow you to diversify and spread your risk out over several different companies and economic sectors, rather than putting all your money in one company’s stock.

If you need help building a portfolio, you can also enlist the assistance of a robo-adviser or consult a financial professional after checking to ensure they’re appropriately registered. Check the SEC’s Investment Adviser Public Disclosure database or FINRA’s BrokerCheck. In Canada, use the National Registration Search. For more information, please see NASAA’s alert on Robo-Advisers. Additionally, many financial planners, investment advisers, and brokers are willing to work with clients who are just starting out on their investing journey and may not have accumulated many investable assets yet. In a way, time is on the financial professional’s side by working with younger clients whose investments will enjoy the benefit of compounding value over time.

Take Action:

Educate Yourself. Go retro and check out your local library or contact your state or provincial securities regulator for educational materials on investing. (To identify your state or provincial securities regulator, please click here.) You may also start by researching lower cost financial professionals in your area or who are willing to work with you remotely on your investment goals. Always check to make sure the financial professional is appropriately registered in your state or province. For more information, see our overview of the different types of financial professionals.

Myth 3: I’m afraid of losing all my money.

“When you invest, you are buying a day that you don’t have to work.” (Aya Laraya)

You can’t deny that it was scary when the US stock market lost half of its value in 2008. However, that’s not the end of the story — by 2012, the market was back on track and trending upward. While there is always a risk of losing money when investing, leaving your money in a savings account is almost a guarantee that you will lose some of the value of your money to inflation. As Robert Allen once said, “How many millionaires do you know who have become wealthy by investing in savings accounts?” The answer to that rhetorical question, is none.

Take Action:

Get some perspective. Look at the data on market performance over the long term (10, 20, and 30 years). Understand that while there are fluctuations, in general, the market has trended up over the long term. Consider the timeframe for your investment goals — when do you hope to retire, or semi-retire and pursue your own hobbies or interests full time?

Don’t get hung up on the sensationalized news on social media or 24-hour news shows. It’s important you don’t make your investment decisions based on sources that offer dramatic, sensationalized spins on the latest market dip or the hottest new IPO.

Bottom Line

We can’t say it enough — right now time is on your side, but with each day that passes, it’s a little less on your side. If you remember any of the following, you need to be investing for your future:

Playing Oregon Trail in Computer Lab Class. (We all died from dysentery at some point!)
Facebook when it required a college email address to sign up.
What you thought was your favorite N*Sync song turned out to be Limp Bizkit.
Total Request Live with Carson Daly.
Princess Diana Beanie Baby Bears
Blockbuster Video.
AIM (AOL Instant Messenger).
Burning Mix CDs for your best friends or romantic interest.
Floppy Disks.
Dial up internet.
Getting DVDs in the mail from Netflix.
Twilight

Source:

https://www.nasaa.org/investor-education/millennial-money-mission/fear-of-investing/

What happens if you do not invest some of the money you saved? (4 Articles) [Part 1 of 2]

A) MY 13 INVESTING-RELATED ARTICLES

B) 25 INVESTMENT-RELATED ARTICLES FROM VARIOUS SOURCES

Article #1: If you don’t invest, you’ll never get to retire: Investing May Help You Retire Comfortably (Pru Life UK)

Article #2: Here’s How Much Money You Lose by Not Investing (From TheBalanceMoney.com)

You Will Need Funds in Retirement

The Cost of Not Investing $20 per Month

The Cost of Not Investing Grows With Your Ability to Save

Don’t Lose out by Ignoring the Power of Investing

Article #3: Why Should I Consider Investing? The Importance of Investing at Any Age (From Investopedia)

KEY TAKEAWAYS

Why Investing Is Important at Any Age

Article 4: Fear of Investing (From the North American Securities Administrators Association/Nasaa.org)

Millennial Money Mission: Millennial Fear of Investing — Where do I start?

Myth 1: I don’t have enough money to start investing.

Myth 2: I don’t know enough about investing — I have no idea which stock to pick.

Myth 3: I’m afraid of losing all my money.

Bottom Line

Written by SHEENA RICARTE

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