Most of us were taught while growing up that you can earn an income only by getting a job and working. And so that’s what most of us do. But of course, you and I both know that there’s a limit to how much we can work and how much money we make out of it. Add to that the fact that having a bunch of money is no fun if we don’t have the leisure time to enjoy it.
Don’t you wish you could have more money without having to exert a lot more effort? How would you like to retire early and spend your remaining years doing the things you love and enjoy, provided of course that God in his mercy and grace will let you live beyond 60 or 65?
The good news is, there is a simple way to accomplish this and that is by growing your money and making it work for you. Since you cannot possibly create a duplicate of yourself to increase your working time, you can just send an extension of yourself, that is, your money, to work.
So while you are working hard for your boss, spending quality time with your family and loved ones, sleeping and resting, or socializing with friends, you are growing your money elsewhere and making it work harder for you.
Simply put, growing your money and making it work for you maximizes your earning potential whether or not you get a raise, decide to work extra hours, or look for a higher-paying job. But what is the best way to grow your money? You grow your money by investing it to earn a good return.
What is Investing? How is it Different from Saving?
Although the words saving and investing are often used interchangeably, they mean entirely different things. They have different purposes and play different roles in your financial strategy.
Saving involves the protection and preservation of money from loss; it is the process of putting money gradually aside in extremely safe securities of accounts for emergency purposes or future use. People generally save for a particular goal, like paying for a car, a deposit on a house, or any emergencies that might come up.
Many parents save money to pay for their kids’ educational expenses or for a family vacation. Although saving money can help you achieve your desired outcome, your saved money will not be growing your wealth.
Investing, on the other hand, means to make a long term commitment to putting money away and letting it grow to a larger sum. Investing is the process of using some of your money to buy an asset that you think has a good probability of generating a safe and acceptable return over time.
Legendary investor, business magnate and philanthropist Warren Buffet defines investing as “the process of laying out money now to receive more money in the future.”
Types of Investment
There are many types of investments and investment styles you can choose from. You can invest in stocks, bonds, mutual funds, ETFs, gold, real estate; you can even start your own business. The point is that no matter what type of investment you choose, the goal is to put your money to work so it will grow and earn you an additional profit.
When you buy stocks (or equities), you become part-owner of the company or business which entitles you to vote at shareholders’ meetings; you are also given the opportunity to participate in the company’s success via increases in the stock’s price and dividends that the company might declare.
Bonds are grouped under the general category called “fixed-income” securities which are debt instruments issued by corporations and the government. When you purchase a bond, you are lending out your money to a company or government in exchange for periodic interest payments plus the return of the amount you lent out.
Just like stocks, bonds can be purchased as new offerings or on the secondary market. A bond’s value can rise and fall based on a number of factors but they move inversely with the direction of interest rates.
3. Mutual Funds
A mutual fund is a pooled investment vehicle professionally managed by an investment manager that allows investors to have their money invested in stocks, bonds, money market instruments, and other assets. When you buy a mutual fund, you are pooling your money with a number of other investors and you pay a professional manager to select specific securities for you.
The primary advantage of a mutual fund is that you can invest your money without having to worry about what stocks or bonds to buy. In other words, you can invest without needing the time or experience in choosing investments. Mutual funds also allow both large and small investors to invest and achieve a level of instant diversification.
Exchange-Traded Funds are like mutual funds in many respects but unlike mutual funds, an ETF trades like a common stock on the stock exchange during the trading day so they experience price changes throughout the day as they are bought and sold. ETFs also have typically higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
5. Alternative Investments
Aside from stocks, bonds, mutual funds, and ETFs, there are many other ways to invest in order to grow your money such as real estate, hedge funds, gold, and private equity. But these often have restrictions in terms of how investors can have access to their money.
Some people think that investing is gambling but it’s not. While gambling is putting your money at risk by betting on an uncertain outcome with the hope of winning more money, investing is not simply throwing your money at any random investment. It is important not just to invest but you must invest wisely.
A real investor performs a thorough analysis and puts in his or her money only when there is a reasonable expectation of profit. There might be risks and the outcome is not guaranteed, but when you invest you have the potential of better gains.
The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time. Investing some of your hard-earned money for your future needs is a way to make the most of what you earn.
So regardless of your current age, it’s never too late to begin investing and growing your money to be able to support your lifestyle and secure your financial future.
But wait, there’s actually a better option. You can start your own business with zero capital; a business that you can manage wherever you are for as long as you have a laptop and a good internet connection. No kidding!
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18 thoughts on “What is the Best Way to Grow Your Money?”
I really need to start investing. This article is very motivating. I feel like I can do it. Thanks for all of the tips on the best way to grow my money through investing.
If you already have an emergency fund then the next move should be to invest your extra earnings in order to make them grow. Although there are risks involved in investing, I firmly believe that it is still the best way to grow your money. Instead of keeping your money in the bank, why not buy the bank and share in its growth and earnings through dividends and capital appreciation.
Nice article Alice, thank you.
I am between whether I have to sell all my Tech stocks or not. Today, I log in my investment account and find out that all my tech stocks are not performing well. Want to sell them out, but after reading the post I make up my mind not to sell them.
Anyways, thanks again for sharing your insights.
It’s really tempting to sell your stocks when you’re gaining or losing a lot. But if you know that they have good fundamentals and you believe that they’ll be here in the long run or that they could outlive you, keeping them and adding more when they become a bit cheaper is the best move .
Thanks for stopping by!
These are great ideas for investing. One thing that you should mention about investing is that what you select will depend on your personality and risk tolerance. I have many friends who are traders and each one has their own strategy for approaching the market.
Hi Melinda, thanks for your comment.
You’re right, investing has some risks that’s why one needs to determine his own risk tolerance before beginning to jump into the investing arena. Also, you should never let your emotions affect your investing strategy especially when the market is down. While investing is the best way to grow your money, there are risks that come with it. No one knows what the market would look like tomorrow or the next 3 years, however, history tells us that the trend for the market is always up.
By the way, I am not an active trader and I do not encourage others to try it, especially if they know nothing about trading. I am an investor which means I am in for the long term.
You raise a very good point about the differences between saving and investing. Most people tend to neglect investing because of fear and end up hurting themselves by looking for a sure thing.
Nice article, thanks for this!
Thank you Vivek.
I believe that almost everybody knows what it means to save but not everybody has some idea about investing and how it can help them achieve their goal of reaching financial freedom.
When it comes to investing, there really is no guarantee that your money will double after just a few months or years. However, investing long term will increase your chance of growing your money as opposed to just letting it sit in the bank.
When reading your post, it felt like I was in one of those financial engineering classes hahahah. Only that this time, I am understanding from a different perspective, which is to invest my money, not to pass an exam.
Thanks for this reminder. I never really thought of this type of investment to grow my money. I was particularly interested with the gold alternative investment method. How does this work? By the way, where does this gold come from? And can individuals actually take them home? Who are those who can invest in gold?
I’m interested about gold because I’ve only seen it in movies, read a bit about it, but now you are saying I can own one of those bricks? How does it work?
Investing in gold is one of the ways you can grow your money and there are four way by which you can do this.
1) Gold Exchange Traded Funds (ETFs) – this is an investment type where you do not have to worry about storing the physical metal. Instead, you buy them as shares to be added in your portfolio. For each share of these ETFs you buy, you generally own the equivalent 1/10 an ounce of gold.
2) Gold Exchange Traded Notes (ETNs) – this is a riskier way of investing in gold. You give a bank money for an allotted amount of time and, upon maturity, the bank pays you a return based on the performance of what the ETN is based on, in this case the gold futures market.
3) Gold Bullion – You buy physical gold such as coins, bars and jewelry at various prices which you can store in bank safety deposit boxes or in your home. You may also wanna buy and sell gold at your local jewelers. American Buffalo, American Eagle and St. Gauden’s are some of the most popular gold coins.
4) Gold Miner Stocks – You invest in gold through gold mining stocks. This is also a bit riskier because you are trading with a broader market. If the gold price drops 10%, gold stocks can plummet 20%-30%. That’s why when investing in gold through Gold Miner Stocks, it’s important that you find companies with strong production and reserve growth. Make sure they have good management and inventory supported by either buying smaller-cap companies or by maintaining consistent production.
I hope this helps.
Great Post ! Will have to read it again and study it ! Lots of good information ! Most of us do not know how and where to invest ! We need more people like you to teach others..
I used to be in many people’s shoes in not knowing how and where to invest their hard-earned money. And I don’t claim to be a guru when it comes to investing and money matters, I am just an ordinary citizen who wants to spread financial literacy to others. I received so I also want to give back.
This is an education article for me. I am a low risk investor and only save my money in the bank. Actually the money value saving there is decreased because of inflation. So your article is very helpful for me to have a better understanding of the types of investments.
My biggest regret when it comes to money is not knowing about all the types of investments. When I started working at the age of 21 I thought it was enough to just add to my savings account every month and so that’s what I did for almost 14 years. The problem was that, no matter how much money I had in the bank, it felt like I never had enough because of inflation. You’re right, the mere interest that our money earns in the bank could never beat inflation which seems to shoot up year after year.
I don’t remember already how many times have I told myself in the past 4 or 5 months or so that had I known about all these information I know now, I would have been a millionaire today and preparing for my early retirement. But it’s not too late to start. Like what I said in my post, regardless of your age today, you can start investing and growing your money. Work hard but let your money work harder for you.
Thank you so much for all this information. I agree there is a big difference between saving and investing – learned that from Napoleon Hill and Robert Kiosaki and have been looking for different income streams ever since. With the changing money and job markets, it’s never been more vital to learn about these things. Thanks again for your insight.
Ever since I came to know about the different investment vehicles, I started sharing it with my friends. I always tell them to invest some of their hard-earned money in stocks and mutual funds or even VUL (insurance with investment) instead of just parking it in the bank for a very minimal interest.
Rich Dad Poor Dad by Robert Kiyosaki was also an eye opener for me. I thought it was enough to keep working my butts off and save some money in the bank for future purposes. It turned out, there are better ways to make money and to grown them at a much higher rate.
HI, I love this Great post !! Wow you have touched so many people Lives about how they will invest their money or which way they can invest their money, Society has made it very hard for us baby boomers, people are coming out retirement because they don’t have enough in their savings , This is very good information about choices we all will have to make one day and I love how many choices you talked about . Great Post! Thanks for the information!!
Preparing for retirement is actually the main reason why I think we should grow our money by investing instead of just parking it in the bank or somewhere else. While we are able to work and earn a living, we must prepare for the future. While we need to set aside an emergency fund, we must also find ways to grow our money and make it work for us.
Sadly, some if not most of us are still in the dark about how to invest because of the misconception that it is only for the rich and wealthy. These days, investing in stocks, bonds, mutual funds, etc., can be done online and there are a lot of online stock brokers to choose from. Unlike before when investors rely on traditional stock brokers to execute the transaction for them.