Why Invest?
Are you asking yourself why invest?
Well, today I'm going to explore the concept of investing and help you decide if you should invest your money.
Saving Money Isn't Enough
Saving money is important, but you can do more to improve your financial situation.
Once you have saved enough money to cover 3-6 months of expenses (as recommended by personal finance guru Dave Ramsey) it's time for you to consider investing your money!
The Only 2 Ways to Make Money
There are only two ways to make money in this day and age: by working for yourself or someone else and/or by owning assets that generate cash.
You are seriously limiting your earning potential if you leave your money in cash, whether that be in a savings account—or under your mattress.
Your money cannot work for you while it's sitting in a savings account, and the only money you'll ever make will likely come from your job or through inheritance.
You know the only two ways to make money, now I'll show you some numbers to really pique your interest!
Why Investing Is Important
Investing is a great way to put your money to work, and is the only way to build wealth—besides increasing your income.
Intelligent investors grow their money fast enough to outpace inflation and even increase in value.
Warren Buffett, arguably the world's most successful investor, has doubled his money every 3.5 years (on average) over a 53+ year career.
This means every $1 he had at the start is now worth $19,602!
No, that is not a typo.
Buffett's astounding results are thanks to our friend compound interest.
The Power of Compound Interest
Compounding occurs when your investments generate earnings or dividends which are reinvested and generate their own earnings/dividends.
Compounding effectively allows you to earn money—on your money. And the power of compounding increases exponentially over time.
For example, here is what $10,000 would look like when growing by 10% annually for twenty years.
Notice how the figure grows more and more quickly overtime.
Investing: Risk vs Reward
Every type of investment offers its own level of risk and reward. Whether that be stocks, bonds, mutual funds, options, futures, precious metals, real estate, a small business, or a combination.
- Risk: Risk is the chance that your investment will go down in value.
- Reward/Return: Return is the money you receive from the assets that you have invested in—or the overall increase in the value of your assets.
For example, investing in stocks presents more risk than leaving your money in a savings account—but your money can grow much faster!
Some of the highest yielding savings accounts in the U.S (like CIT Bank) have an interest rate of about 2.25% annually. Your money will take 32 years to double in value at this rate!
While the stock market has provided an average return of 10% over the past 120 years. Meaning you can expect to double your money every 7 years!
The Takeaway
Investing your money (in stocks and real estate) is a great way for even the average person to build wealth.
You need to start investing as soon as possible to get the most out of investing your money.
It’s never too late to become an investor. And remember that all investments start with the first dollar—no matter who you are or where you come from.
Now you can stop asking why invest my money?
Start investing today and reap the rewards tomorrow!
If you'd like to learn more about investing visit here: How to Invest 1000 Dollars and Grow It Quickly!
What is your favorite type of investment?
