Several years back, when individuals earn money (as payment for a work done or profit from a sale) they often proceed to store it in their banks. Paycheck after paycheck, these individuals often stick with the habit of keeping their money in the abode of financial institutions till they wish to use it. Today, things have changed drastically. Rather than keep money in various bank accounts, individuals prefer to invest. The rapid rise in investments spanning across several industries and has led to the question: why is investment important?
Investment is important for several reasons: it is a great way to improve your finances, also, investing is the best way to safeguard your money from inflation, which is the bane of every economy.
The wealthy don’t store their money in banks like a normal American would. A huge chunk of their money is often stashed in various investments. Seeing the rich taking huge risks by investing their money in risky ventures may seem weird to you. Why not secure the money in the bank? Why risk money you work for on an investment that could go either ways? Of course, if some of us were in their shoes we may decide to play it safe. However, I bet we would embrace investment like never before if we know the benefits that comes with it. And that is what I plan on discussing in this article.
What Happens if You Go Below the Minimum Balance?
Why Investment Is Important?
If you are an ardent follower of the Forbes rich list, you’ll observe that a few of the wealthy men and women, if not most, sitting on the top of that list, have sizable investments. For instance, Elon Musk, who was once the richest man in world, has investments in cryptocurrency, PayPal, SpaceX, Tesla, etc. The same goes with Jeff Bezos and other wealthy individuals out there.
The fact that the rich have different type investments is an indication that investing is quite profitable. And while not everyone may share the idea of investments being a huge source of wealth, you must understand that people have gotten rich by simply investing a few thousand dollars. Of course, the journey isn’t always easy. People have lost a huge amount of money from Investments. However, if you do your due diligence and follow advice from competent financial advisers, you surely wouldn’t experience loss that would make you bankrupt.
Before we look at the benefits that comes with investing, let’s take a step back and look at what investment is generally.
What Is Investing?
Investing can mean diverse things to different individuals. While investing for some individuals mean putting funds to make profit, for some other it can also mean investing time or effort for some future benefits like investing in oneself’s skills or health.
In this article, we will define investing as “putting money into financial product, shares, property, or a commercial venture with the desire of making profit”.
Investing means committing capital or funds to diverse types of assets with the desire that you will generate a gain or profit in the future from these investments.
Saving vs. Investing:
Saving and investing are two separate terms. But, sometimes, people tend to view these terms in the same light. An investment is generally different from savings and this is because an investment is a more active way of deploying your wealth while saving is when you store a portion of your income without worry regarding where you are deploying your additional fund.
That said, what are the benefits of investment?
Higher Investment Returns:
Investing your money in an asset involves what we call a tradeoff. In a tradeoff, the investor forgoes the utility of using the money for his investment in the present for some higher utility in the future.
Investment in stock can result in returns via two ways. First off, it could be through dividends and secondly, it could be from capital gains.
Investing in a bond comes with several benefits to the investor. An investor can benefit from a bond in the form of regular payouts or coupons which are given during predetermined time periods.
Investing in real estate can also benefit an investor via rental income including capital gains.
Retirement Plan:
When you retire, how do you take care of your bills? Via your investments, of course. One of the benefits of investment is that it provide investors with funds at crucial periods. As many individuals depend on their paycheck for meeting their needs, it become hard to maintain their lifestyle when one doesn’t have a job.
This means that people need to invest a portion of their income during working years to make sure that there is something to fall back to after retirement. While the government and companies often give a specific benefit pension, it makes sense to have a defined contribution plan.
Overcome Inflation:
Investing is also beneficial because it helps escape inflation. If you fail to invest your money and leave it to lie fallow in your bank account (checking or savings), the money will reduce in purchasing
While the reported inflation is a little low these days, the real inflation is very high as education and healthcare expenses are skyrocketing than reported inflation.
Achieve Your Financial Goals:
Investing is one of the best ways to achieve your financial goals. Do you plan on buying a new house in the coming years? Or do you plan on buying your dream car? You can achieve this by considering a selecting an investment (it could be real estate, precious metal, bonds, stocks, etc.) and committing your money. Provided you selected the right investment, and adopted the right strategy, you are bound to meet your financial goals.
I would always advice individuals to meet a financial expert if you wish to invest. This is important for those who know little about investments. However, for me, I believe real estate and the crypto world are currently the best investments.
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Why Investment Is Important in Today’s World?
These days’ people are ok with keeping their money in their banks. Whenever they need some cash, they visit their bank or an ATM, and request for the money they require. When the next paycheck enters their bank account, they take a portion of the funds to cater to some bills and leave the rest there. People call it saving and are super proud when they do so. If you fall in such category you must understand that investing your money is far better than saving it. But why is that so?
Investment helps you increase your wealth and safeguards your money from inflation. In addition, having good investments is one of the best ways to make money without stress.
If you have zero investments, don’t hesitate to contact a financial expert to discuss the best investment for you.
