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In August 2019, Eduardo Rosas was very clear about two things: his path to financial freedom and that there was very little information about it. So I created the YouTube channel ‘Personal Finance’ , with more than half a million subscribers. There, the finance expert talks about everything related to money, from investments and retirement plans, to credit card reviews and how to generate new sources of income.
“Learning to invest can make the difference between reaching our financial goals and inflation eating away at your savings ,” Eduardo said during his participation in the interactive personal finance festival Money Fest 2021 . “It can also be the difference between raising enough money to stop working at some point, or having to work even in our old age, perhaps on something we don’t like.”
These are the 5 basic points to start investing according to Rosas:
1. Define your goal
“We cannot start investing or define what steps to follow without first knowing where we want to go,” he explains. For this we must answer three questions:
– So that? This helps us to visualize what we want to achieve and the importance of our goal, and it will drive us to continue investing. It can be buying a house or raising money to retire comfortably.
– How many? For example, if you want to save for retirement, Rosas says that “we will need to gather 20 to 25 times what we spend a year, you can take as a reference what you spend at this moment, multiply it by 25 and that put it in the inflation calculator, to know how much you have to save and invest for your retirement. “ The important thing is to have an amount in mind that is in line with your ‘what for?’
– When? It is important to set a deadline for that goal, to define if you need to collect that amount for a specific moment: one year, five, ten or more.
Once these questions are answered, you can define your goal in a single sentence , for example: “I have to raise 5 million pesos for my retirement in 37 years.” Write that phrase on a piece of paper that you can have on hand to continually visualize your priority and avoid getting out of the way.
2. Know and evaluate the risks
“We must identify which risks we want and can bear,” Eduardo pointed out. For that, we must know the three basic types of investment:
– Debt. Either government or banks, “it is considered one of the safest investments , although it has lower returns ,” he explained.
– Actions. “In this case we expose ourselves to the company doing badly for multiple reasons and the value of its shares going down” , for this reason, Rosas recommends “investing only in a few companies” . He explains that in these investments “we expose ourselves to greater risks , but they will normally be rewarded for higher returns .”
– Real estate or real estate. In this case we expose ourselves to moderate risks and returns . “It is a midpoint between debt and stocks,” said the financial specialist.
“The idea is to target these three types of investments, depending on how much risk we can bear according to our objective and our way of being or thinking,” he said.
3. Create an investment plan
“The key is to reduce risks without reducing returns. This is possible through diversification, because diversifying reduces risks, we are less afraid to invest and we can maintain the investment ” , explains the famous youtuber.
Rosas recommends “starting with what exposes us to the least risk: bank or government debt (cetes, bonds). Next, we can consider Real Estate Investment Trusts (FIBRAs). And if we can bear more risk, we go to stocks, investing in several companies through an investment fund ” .
Eduardo Rosas, creator of the YouTube channel ‘Personal Finance’ during his participation in Money Fest 2021.
4. Get started as soon as possible
Having an investment plan is a constant process, Eduardo says, it can take months or years. “What you do have to do is start as soon as possible to achieve your goals within the timeframe you set,” he said. “The earlier you start investing, the more returns you will generate. The other key is to keep that investment for as long as possible to take advantage of compound interest. “
5. Adapt your plan
Creating your investment plan can take a long time and you must constantly modify it. “Your plan must be adapted to the different stages of your life, your responsibilities and the changes that arise. As time goes by, the objective is also different ” , explained Rosas. “It is important that our objective changes as we change,” he concluded.