Why investing is important? All you need to know
You’ve probably asked yourself this question repeatedly- ‘why investing is important?’. While there are many reasons, the most significant is financial stability.
Investing refers to channelling your money into different financial instruments to achieve profits and grow your capital.
You can earn money in two ways – work for someone else or work on your venture. You sharpen your mind and different skills that help you earn money.
Another way to make money is by making your money work to get wealthier. Investing serves this purpose. This article will figure out a few reasons why investing is essential.
What are the different ways to invest?
There are many ways to invest, for example, stocks, bonds, mutual funds, options, futures, precious metals like gold and silver, real estate and other small businesses or possibly a combination of all of the above.
Income can come in the form of appreciated value to the investment, dividend income or from, the sale of a business or liquidity of any other of the above instruments.
Why investing is important?
Investing is essential for many reasons. For example, to create wealth that might help you in tough times or help you achieve goals.
And you also want to take advantage of the power of compounding, not forgetting inflation, so that your money is worth it over time.
If you plan to retire at some point in time, you must invest in getting a corpus for yourself to live your retired life in a hassle-free manner. Wealth creation could mean having a certain amount of money in your bank account or having a particular value of assets under your name.
Let’s see how investment helps in wealth generation.
Why should you invest?
Investment is a way to grow your money. The creation of wealth isn’t merely a goal; it will help you through your lifetime; in fact, it can help your future generations shape their future.
Investing will allow you to take advantage of the compounding power of money. For every rupee that you invest and earn, your investment base will grow and thus grow; your capital will grow.
For example, we can take the 15 * 15 * 15 rule that we have read in another article; it is a powerful way to invest and achieve your financial and life goals.
Money sitting in your bank account loses its value over time because of rising prices in the economy. If prices are rising, your money will be bought less today than yesterday.
If there is inflation over 30-40 years, the value of your money is going to be reduced by a significant amount. Investing can help you beat inflation by earning more than what is lost by inflation – so that your money remains worth at least the same over time.
Retirement is also a valid reason for you to start investing. You need to have a large corpus to live off the last 20-30 years of your life.
Saving and investing for retirement requires careful planning and calculation of the amount you will need, and then proceed with an investing strategy.
Your child’s future: In one of the previous articles, we talked about how important it is to save and invest for a secure future for your child.
Investing for your child’s education and marriage requires investing in a well-phased manner with appropriate withdrawal options in times of need.