The things I’m going to say are not directly related with development or design but can be applied on these contexts as well… I’m not an expert on this subject and I’m not even the best example to be followed, the main reason to be writing this post is exactly to remind myself that I could be doing it way better than I’m doing right now, I’ve missed the opportunity to make some extra money because of laziness, dumbness and negligence on the past couple years even knowing these things and investing for a long time.. nothing groundbreaking but hard to put in practice and stick with it…
The a-ha moment
When I was about 16 years old I realized that if you invest $10.000 and manage to earn 25% of profit per year and reinvest all the money after 21 years you are going to have 1 million… yes it is true, it’s called compound interest. At that specific time the Brazilian economy was accelerated and some conservative investment funds (CDI) were paying ˜25% per year of profit, this period lasted for about 3 years, after that things went “back to normal” and this kind of investment wasn’t as profitable anymore – delaying my plans of becoming a millionaire before my 40th birthday :P…
Don’t wait until you have enough money to invest
One thing that is interesting to notice is that the most important factor on the compound interest is time. The interest over $5,000 for 20 years makes almost 30% more money than $10,000 over 10 years. Don’t wait until you have a lot of money to start investing and don’t waste your time: “time is money”.
Don’t spend all your profit
This is really important, always reinvest a portion of your profits, your capital will only increase if you keep reinvesting. Spending everything will limit your income and may even lower it if something unexpected happens.
Don’t put all eggs in one basket
Having a single type of income or betting all your money into a single investment is not recommended, even when it may seem safe to do it. If you drop the basket or if it get lost/stolen on the way it’s always better to have a backup.
Don’t believe in miracles
I have some friends that lost money because they invested in a pyramid scheme even after I told them that it was probably a scam. Be suspicious of anything that looks too good. There is no easy way of making money, otherwise everyone would be doing it.
Saving money isn’t an investment
You don’t get rich just by saving money. Remember about the “time factor” over compound interests. Don’t fully sacrifice your comfort, health and fun without a reason. – “It ain’t no fun waiting around to be a millionaire“.
Revise it often
Make sure your investments are still the best option, economy changes constantly and what was a good business a couple months ago may not be as profitable anymore. Make sure you are making as much profit and taking as less risk as possible.
Don’t become neurotic about it
Unless you do it for living there is no reason why you should become obsessed about it. Don’t spend too much time managing your investments unless the results worth it. If it takes 40h of management to make $100 (1% of $10.000) you should maybe consider choosing an investment that require less attention and use this time to do some freelance work, study or have some fun… - Make your money work for you, not the opposite.
I should stop loosing time and start investing more and on an intelligent way…
PS: Investment isn’t only related with money and money isn’t the most important thing in the world. Knowledge, relationships and fun are usually the most valuable investments that you can do.
PS2: If you are Brazilian I would recommend reading the book “Investimentos Inteligentes” (intelligent investments) It has many specific things about the Brazilian economy, taxes and rules. - I’ve read it a couple years ago and it is really good.