Introduction
Glad to see you here at the start of your investment journey ! This “Getting Started” guide will get you all setup and ready to invest in 4 main steps illustrated in the infographic below.
Before we get to the steps however , there are a couple basic concepts that I will cover in this post , think of it as a little warm up before we get to the main event.
1. Saving vs Investing. What’s the difference?
So, what exactly is investing? And how is it different from saving?
To put it simply, saving is the act of holding or collecting money in an asset with very limited growth potential. This is essentially the money you keep in your bank account—often called a “savings account.” Savings are important—they help maintain financial stability. But relying solely on savings is a surefire way to stagnate your wealth.
As Robert Kiyosaki, the author of Rich Dad Poor Dad, once said, in today’s world, “Savers are losers.” And there’s one big reason for that: Inflation.
How Does Inflation Affect Savers?
Inflation reduces your purchasing power. If you had 100 rupees last year and inflation was at 60% this year, your money isn’t worth 100 rupees anymore—it’s worth about 62.5 rupees in real terms. That’s a 37.5% loss in value.
Some people have seen half their life savings disappear because of inflation. And I’m not exaggerating.
You might be thinking, “But my savings account has a 3% interest rate! I’m actually compounding my money.”
Now, do you know what the current inflation rate in Sri Lanka is? Well…..As of writing (03/03/2025), it’s -4%, meaning we’re experiencing deflation – But this is an exception. Just a couple of years ago, inflation was sky-high, peaking at 67.4% in September 2022 due to the economic crisis. A 3% interest rate on your savings could never keep up with that, meaning you’re actually losing money when you only save.
So, what should you do? Should you just stop saving altogether?
As much as I’m not a fan of traditional saving, there’s one saving strategy I strongly believe in—Emergency Funds. This will be our first step in building a solid financial portfolio.
2. What is investing?
Investing is the act of putting money into assets that have the potential to grow over time. Unlike savings, investing aims for higher returns that match or exceed inflation, allowing you to actually grow your wealth year after year.
However, unlike savings, investing comes with risk. There’s a chance you could lose the money you invest. But when done correctly—and we’ll make sure to do it right—it’s the best way to consistently grow your capital over time.
3. What is an investment portfolio?
In investing, a portfolio is a collection of financial assets owned by an individual, institution, or fund. This can include stocks, treasury bonds & bills, real estate, gold, and other assets.
The type of portfolio you build depends on your financial goals:
- If you’re in your early 20s, your portfolio should focus on high growth, meaning it will have a higher risk—this might include stocks and even cryptocurrencies.
- If you’re in your 60s, you’d want a less volatile, income-oriented portfolio to support retirement, which might include bonds and fixed deposits.
But one thing all good portfolios have in common? Diversification. As the old saying goes, “Never put all your eggs in one basket.”
Step 3 of the Getting Started Guide Covers everything you need to know about getting your portfolio up and running.
4. Investments available in Sri Lanka
Contrary to popular belief, Sri Lanka has plenty of investment options. Most households are familiar with Fixed Deposits, but here are a few other investment instruments you should know about:
- Unit Trusts
- Stock Market
- Treasury Bonds & Bills
- Real Estate
- Gold
- Debentures
- Alternative Investments (e.g., Rooftop Solar)
Each of these investment types is discussed in detail on our Investment Options page. After finishing the Getting Started Guide, I highly recommend going through those sections for a deeper understanding.
5. Investing vs. Earning: The Most Important Lesson
Investing is great—it helps grow your existing wealth. But you need money to invest in the first place.
This was a hard lesson I learned myself. I used to be extremely frugal, saving every rupee I could. As a university student, my income was limited, so I tried to save and invest whatever I had. But it was exhausting.
Then I started earning real money. And I realized something: saving pennies for months is meaningless in the grand scheme of things.
Let me break it down:
- Suppose I save and invest 5,000 rupees per month for a whole year—painstakingly difficult on a small income.
- Then, I get a job that pays 100,000 rupees per month.
- If I invest just 20% of my salary (20,000 rupees) per month, I will save in 2 months what I previously took a whole year to accumulate—and with much less effort.
The lesson here? Sometimes, it’s better to spend money on yourself—developing skills, learning new things, and increasing your earning potential or simply even enjoying life.
Before you focus on investing, focus on earning. Build your income streams first, and then you can start investing properly.
That’s about it for the introduction. You can now move on to Step 1 of the Getting Started Process by clicking below !