Investing: putting your money to work for you

By Indre Butkeviciute

I always think of 1st of September the same way as I think of 1st of January. New beginnings, new ideas, new challenges: a new start. We all come back in September after having time for ourselves to enjoy the beauty of summer, relax and recharge, come up with new ideas and find a new release of energy; we are focused and ready to go. No wonder that in the investment world there is an old saying that some people still abide by sell in May and go away. Now the time has come to get back into the game, re-evaluate your position and make decisions.However, before we sign up and start trading let’s take a few steps back and really understand what is investing, why do it, how to approach it, what are the key steps to take and other aspects to think of.

However, before we sign up and start trading let’s take a few steps back and really understand what investing means:

  • why do it;
  • how to approach it;
  • what are the key steps to take;
  • and other aspects to think of.

What is investing?

The best description I found was on Investopedia: ‘The act of committing money or capital to an endeavour with the expectation of obtaining an additional income or profit’. In more simple terms investing is putting your money to work for you. Unfortunately, it is not as easy to find the right ways of making this money work and there are many different factors that need to be considered.

In more simple terms investing is putting your money to work for you.

Equally important is to understand what investing is not. A lot of people sometimes compare investing with gambling, and I really don’t agree with it. In fact, when you are in a casino making bets, you don’t really spend time evaluating all the different factors and making sure the game you are about to play is right for you. You simply bet, wait and win or lose. If you are an investor, you don’t just throw the money at anything that comes your way, there is a lot of considerations that need to happen on your end before you make any decisions. You need different types of analysis on the investment idea itself, as well as analysing your own attitude to risk, understanding your return expectations, thinking about time horizon, thinking about how much of your total assets you want to deploy to any particular idea, if you can afford to lock up the money for a certain period of time or if you need to be able to access it at short notice.

As an investor, you have to analyse your risk, which makes investing completely different to gambling.

Why should I invest?

The next question that comes naturally is why should I invest? There are many reasons why different people choose to invest their money. One of the most compelling and logical reasons is to simply follow what the description says: make your money work for you. If you just keep it in cash in your piggy bank, you will in fact be losing money. You need to at least invest into something that keeps pace with inflation. By not having it invested into anything, the purchasing power of your money is decreasing as is your wealth.

Read more: Dopamine Investors: psychology and decision making behind investing

Thinking about it more broadly, different people choose different reasons for entering into various investments. It very much depends on their goals for the future and the financial aspects of that. You might be planning for an early retirement and looking for investments that could give you capital growth with future income. If you have young children or are thinking about having children, paying school fees in the near future might be your driving factor. The range is very wide as it is very personal.

Consider investing if you’re planning for an early retirement, looking to grow capital or need funding to pay fee tuition.

Sometimes, people think that unless you have substantial wealth, there’s no need to even think about investing. However, on the contrary, starting early with small amounts help you gain the experience, understand the investment world better and you get to potentially increase your investable capital. In my opinion there really are no limits in terms of when you should start investing and how much. It is all up to you to make the decision when you feel ready.

Once you have made the decision that you should, after all, invest your money in order to make it work for you, it is very important to take your time and understand some of the key aspects. Over my 10 years of experience in private wealth management, I have realised that the key to building a long-term successful relationship with my clients is the first steps we take together. Similarly, I think for all of you who is thinking of becoming an investor, it is important to go through the same first steps if you want to have a long-term successful relationship with your investments.

Three key steps for successful investments.

First Step: have a particular understanding of your present assets

Really having a thorough understanding of your current situation and assets; sometimes it is easier to have professional help with this.

There’s a wonderful quote by Louisa May Alcott, the author of the wonderful classic Little Women: “It takes two flints to make a fire”. The core of my business and success has always been to work with clients as a team. I never work for them, but I always work with them. Input is paramount from both parties: the one that has the assets and is seeking the advice as well as the professional who is giving the advice.

Second Step: understand your risk tolerance and returns expectations

It takes time and effort to really understand what is the risk and what is return and how the two are related. Each individual has a very different understanding and perception of what is risky overall in life and the same applies to the investment world. Some people choose to go on diving expeditions, do bungee jumping, go skydiving, while others would think these are incredibly risky and scary things to do. It always has to be within your comfort zone and before you embark on making any decisions on investments, make sure you know exactly how much you are willing to lose and how much you expect in return for the risk you take on. There are of course general rules that put certain types of investments into one of three buckets: low risk, medium risk or high risk. However, I believe that it is also as much of a personal attitude as well; my high-risk investment might be an only medium risk for you.

Third Step: understanding both – short term and long term goals

Investing is all about finding the right balance between not only different types of investments but also the duration of those investments. It can never be only about short term or only about long term. Our daily life, as well as periodic changes, influence how we feel about investing overall. You really need to think and analyse your current situation and what your needs are as well as your future. Some of the factors that are more common are age, family situation, children, health issues, lifestyle, current and expected income and much more. There will also be many other factors that are much more personal to you that will influence how you think about investing and what types of investments and vehicles you should be choosing. Like with every other step, never underestimate the importance of professional advice and opinion in these situations.

These are just the first steps that need to be undertaken before you start putting your money to work. They all are intertwined with each other and require a lot of time and effort if you want to make successful decisions and have an investment plan that is personal to you and your situation. I’ve always said there’s no such thing as one solution for all. In my next post I will get a little deeper and focus on risk profiling and diversification and in the meantime take your time and think about 3 most important goals to you at this point in time.

Read more: ALFIES Folk: a series of interviews with our members. Indre Butkeviciute.

By Indre Butkeviciute

About the author

Indre Butkeviciute is a financial advisor with a background in wealth management.
Formerly with Morgan Stanley, and with expertise as a Team Leader in Wealth Management for the Baltic States, Indre has now taken her passion and commitment for client care into her own company, Centaurus Wealth Management.
Lily Advisory is Indre’s newly launched brand, designed specifically for female clients who are looking to increase their knowledge of financial affairs and receive guidance and advice with both long term and short term investment and financial planning.


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