In investing, you will set a target to achieve. It could be an amount you want to earn while doing stock market trading or the amount of money you want to have after you redeem from your mutual funds twenty years from now. Your target could be specified in two units - first, the target amount like 20 million pesos or it can also be a growth in percentage, say 300% or three times the original investment. Some people would relate their investing or trading to a race or a journey. A journey to cross their goals - like a runner or a racer crossing the finish line in a race. But if the finish line is your goal, your pot of gold or your financial target, what will you do in order to achieve it?
Why not ride a vehicle?
While you can walk or run until you reach the finish line, but doing this will take more time. Walking can definitely make you reach your destination but unfortunately it will be much slower. You can also become tired and decide not to continue with the race. Walking or jogging to the finish line is analogous to putting your money in the banks. You might have an existing savings account in the bank where you put all your money. Yes, you can achieve and cross the finish line, but it will take very long to get there. Bank savings account only earns around 1-3 percent per year and sometimes even lower. Ride an investment vehicle. I love technology, I bet you do too. Why would you walk in a race when you can ride a vehicle? You can try a bike, a scooter or even a race car. You can also hitch a ride if you want to. This is similar to using an investment vehicle to accelerate and to cross the finish line faster than walking. You can try riding investment vehicles such as stocks and mutual funds. This way, you will still finish the race but compared to walking, you will get there faster.
Choose between two options
Riding an investment vehicle gives you two options - you can drive the vehicle on your own or you can get a driver who will drive for you. Driving on your own leaves all decisions to no one but you. You should decide how fast you are going to accelerate and what directions you are going to take. This is similar to investing through stocks. You have to know what stocks to buy, how much shares you are going to buy or sell and the strategy you are going to follow. In short, you are on your own. The benefit of which is that if you are an expert on handling this kind of investment on your own, chances are you are going to beat everyone who does not. You decide your pace at your own risk. Or you can try to hire a vehicle driver or ride in a public vehicle. Mutual funds are like public utility vehicles. You don't decide which path you are going to take or how fast you will get there. You will have to trust the driver that will take you there. The benefit of which is that even when you don't know how to drive, you will still reach your destination.
Investing is like a race. A race where you want to cross the finish goal and reach your dreams. It can be your dream house, dream car or the lifestyle you want to have. And just like any race, you can choose whether you want to walk, ride a public vehicle or drive your own vehicle to success! Image from guildford-taxis.com