Building Wealth by Paying Yourself First
When I look around at all of my friends, and a lot of my family, I see a lot of people living from pay check to pay check, under monetary stress. These same people watch the Calendar for payday like a hawk. Pay their bills, and then open up the spending flood gates, before they know it, they are itching for their next pay check. These same people are the people who don't think they make enough money to build future wealth. They are wrong.
The way I save money, is by paying myself first. I have automatic deductions come out of my bank account on the 15th and 30th of every month, which I put directly into a mutual fund for safe keeping. I take a small portion of my pay check, roughly 10% and put it away. This may not seem like much, but over time it adds up.
In addition, with mutual funds you will have the benefit of compound interest on your side. You should EASILY be able to achieve 8% interest on average in a good a mutual fund, often times more. That’s $800 a year on $10000!
Once you start, you will be addicted. Watching your funds grow is incredibly addictive and will inspire you to invest a larger percentage as your income rises. If you have debt, put a portion of this percentage towards the debt and a portion into your mutual fund, so you have something positive to reinforce your automatic deductions.
Money Growth Can Be Substantial
Over the last twenty years, mutual funds have become quite popular with more than 80 million individuals investing in them. Investing in them gives everyone the opportunity to get their share of the market, and if they deliver, money growth can be substantial.
Mutual funds that focus on large, fast-growing companies that have high revenue growth earnings and do not pay dividends, but are making significant earnings are called 'growth funds'. Growth mutual fund managers will take risks and pay more for stocks in order to construct a portfolio of those companies that have above average earnings consistently and/or price appreciation. These funds can be and often times are more vulnerable to rises and falls than other mutual funds. When a market is on the downside, a manager must be aggressive to make up for the loss or a lot of money will go down the drain.
What The Different Types of Mutual Funds Entail
Mutual funds come in many different types, all of which are defined according to the risk factor they carry and the rate of return they attract. They are also categorized according to the sector of the economy in which they invest. Others are grouped according to the long-term goal of the funds, for example, there are those that seek growth as the major goal, while others are purely sought for the returns in form of dividends. These are not the only guiding factors in categorizing the funds, but are the most commonly used.
To mention juts a few type of the mutual funds that exist, let us have a look at the aggressive growth funds. These are mutual funds that do not invest necessarily for the returns, but are basically out to maximize the capital gains.
Many of the investors who invest in them hope to buy them at low prices and sell when the prices have sky-rocketed.