Investing can be overwhelming. It’s not as simple as having enough money to invest. You’ll also need to digest quite a bit of information before you actually begin.
If you’re still on the fence, you may wonder if all the effort is worth it. Why invest? Do you really need to do it, or are there other options?
Reasons why you should invest
Nearly every life goal can turn into reality with enough money. Whether you dream of home ownership, getting married, or going on vacation, you’ll need cash to make it happen.
These goals can become even more challenging when you must consider daily living expenses. Here are 3 ways investing can help:
1. To grow your money
With investing, you’ll let your money work harder to potentially make more money. It might offer quicker growth than alternatives, which helps if you want to reach a certain amount within a set time frame.
If your money doesn’t grow fast enough, it can be very difficult for you to have enough cash when you need it. You may end up putting off your goals or making a compromise with the amount you’ll spend. Moreover, there are situations in life where a compromise may not work.
Investing can grow your money faster, though there are no guarantees. There is always a possibility of losing some or all your money. While no method is 100% sure, there are ways to invest that pose much less risk than others.
2. To fight the effects of inflation
Budgeting and saving are important, but they are often not enough. You also need to invest because it may preserve your money’s value against inflation.
The buying power of money goes down as the inflation rate increases. It reduces your spending power as your money could buy you less goods or services compared to previous years.
While you can’t stop inflation as an individual, there are things you can do to protect the value of your money. One way to do that is to grow your money at a rate faster than the inflation rate.
This will allow you to keep affording the things that you can enjoy and buy today.
3. To be able to retire
Retirement is a new chapter in life that can be exciting if you’re well prepared. To retire, you’ll need to have substantial money or find passive ways to earn.
Through investing, you can gain a new source of income or grow your assets enough to support yourself when you’re no longer working.
Does everyone need to invest?
Investing can help anyone with a life goal that requires a lot of money, which includes nearly everyone. Some people would say that there are other ways to build wealth, like starting a business or buying real estate properties to rent out or sell at a higher price.
Technically speaking, running businesses and putting money in real estate properties are also forms of investments. This is because the end goal is to use your money to make more money.
Another thing to think about is capital. When you opt to open a business or buy real estate properties, you’ll need a huge chunk of money to start.
To get enough capital, you could consider taking out a loan. If that isn’t your thing, you might instead choose to invest your money and allow it to grow until you have enough.
Investing in products like stocks, bonds, and investment funds requires a relatively lower initial capital. You can also start small and add money over time.
Remember that there are different risks and responsibilities involved with starting a business, putting your money in real properties, and investing. Learn the details of each option before making any decision.
Saving vs. investing
Being responsible with your finances starts with saving. In fact, it is ideal to have enough money saved up and an emergency fund tucked away before you even invest.
Savings accounts can keep your money safe, but you may face other risks if you rely on savings alone. For starters, it’s possible to miss out on other opportunities to increase your money.
Think about your short- and long-term goals and what it takes to achieve them. You may find that investing is worth the trouble if it can help you get to where you want to be.
What’s next
