The HealthAsset

What would you add to this list?⠀
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As we approach the end of a tumultuous year, we look ahead to another year. It is important to set goals, whether they are in ones career or finances. Here is some ideas for personal finance goals one can look to accomplish in 2021.⠀
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Every individual faces a different and unique situation, so some of these may be harder for some than others. What 2020 has certainly showed us is the need to have an emergency fund in case of an unexpected “black swan” event such as this, or another emergency taking place. Those that had an emergency fund generally were able to weather the storm with a stronger financial foundation. ⠀
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As well, economic uncertainty tightened bank lending guidelines, so those with an great credit score were able to have access to borrowed funds, that those with a low credit score were not able to. Many people had also refinanced instalment loan rates with their creditors. ⠀
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The last point outlined is investing 10% of income. Those that invested when the market had bottomed in March of 2020 were able to see significant gains on their returns, and this invested capital continues to work for investors. Everyday, 24/7! ⠀
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Let’s breakdown these common misconceptions!⠀⠀
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1)Is investing risky? No. Our money loses value every year because of inflation leading to the purchasing power of each individual dollar decreasing. It is inherently more risky not to invest, than to invest. The best way to invest with less risk is to be well diversified through index funds. Do keep in mind that it is better to pay off high interest debt before investing.⠀⠀
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2)Do you need a lot of money? No. Compounding interest is very powerful when it comes to investing, so starting with a very small amount at an early age can still yield great returns later on. ⠀⠀
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3)Is it complicated? This can depend on the type of an investor you are. For active investors, being knowledgeable of certain financial terms in order to read an company’s financial statement is very helpful ! However, for the passive investor, it is a simple process to buy and hold index funds for the long term.⠀⠀
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4)Are stocks the only option? In addition to stocks, one can also invest into ETFs, REITs, mutual funds, commodities, cryptocurrency, fixed income securities, and money market accounts. ⠀⠀
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Do you know what Warren Buffet means with this quote? ⠀
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It might appear hypocritical for Warren Buffett to say this when he himself lost $23 billion during the financial crisis of 2008!⠀
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However, he is referring to the mindset of the sensible investor. Don’t be frivolous, don’t gamble, and don’t speculate on investments just because everyone else is. Preparing to go into an investment expecting to lose is the wrong mindset. Always practice due diligence and thoroughly understand an investment before taking a position. ⠀
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Buffet himself believed that the most important quality for an investor is temperament, not intellect. Being able to emotionally withstand sharp swings in the market and staying focussed on personal investing goals will lead to massive rewards in the long run. ⠀
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