Why You Should Invest

So, you want to become involved in investing, but perhaps you just aren’t sure about it. Whilst it is likely you have your motives and reasons, have you actually considered just why you should invest?

Perhaps you have money, in savings or other which you just aren’t sure what to do with it. Maybe you may want to put your monthly income to use, or its possible you want to start branching out with your money.

Well, we are here to advocate for investing and why everyone should begin to do so. Investing can be extremely beneficial, and we have highlighted a number of reasons which can help you work towards a brighter future.

To grow your wealth

Arguably the most obvious reason anyone wants to invest. In fact, it is possible you asked yourself ‘why do I want to invest?’ and came out with the conclusion you want more money. That’s certainly not a bad reason, as everyone wants to make more money, right?

Well, investing creates this possibility. You could improve your net worth and grow your wealth, as investing has a solid and proven track record that it can be a consistent method to greater profits.

Example: Using the S&P 500 as a benchmark for investing in the stock market (showing the 500 largest companies in America), the average year on year return is around 7.74%. The graph below indicates the levels of return within the S&P 500, where despite fluctuations, there is an overall positive net average.

Historical Returns of the S&P 500
S&P 500 Historical Annual Returns – Macrotrends

As you can see based on average yearly returns within the S&P 500, investing fundamentally shows steady and continuous growth. Whilst there is always risk and investments may not perform as planned, they can also return greater than the average which means even larger profits.

By investing, it allows you to create a strong financial foundation which can aid in developing your monetary situation into a wealthier one.

To make your money work

Everyone should be aiming to make their money work. The fact is, money which stands still is losing value every day. As you leave your money alone, it really isn’t being put to any use, and it certainly isn’t growing to the values that it could be if you were to invest it.

Inflation, which is the general rise of goods and services within an economy, will lead to your money being worth less. As inflation increases, your money simply does not buy you as much for the same amount. Therefore, your money is decreasing in value.

Example: If inflation was at 2% year on year, we calculated what £100 would be worth in 1, 5 and 10 years (assuming the money was held over the given periods of time, and wasn’t in an account paying interest):

Now

1 Year

5 Years

10 Years

£100

£98.04

£90.57

£82.03

 

As you can see, your money is losing its purchasing power. By investing you are not only able to stop the rot on the value of your money, you can aim to generate far greater returns. Assuming you have invested the money, using the S&P 500 average yearly return, it is beating inflation and it is increasing. Therefore, not only is your money being put to use, it is growing in value.

Additionally, you may think your money is fine in a savings account, which it is if that is your preference based on risk and your requirement of access to cash. However, it is certainly not being put to work as effective as it could be. In most savings accounts, that money will barely match inflation, if at all, and will likely be losing value. With consistently low interest on savings accounts, investing tends to perform significantly better over a period of time. Money that works is money that can prosper.

To achieve your goals:

In life it is extremely likely you will currently be working towards something and usually it comes with a financial cost. So, you may begin saving, borrowing and what not. But there is also the possibility to invest. As you have read, investing not only puts your money to work, but allows it the potential to grow your wealth. All of which can aid in achieving your ambitions.

Your goals may be short, medium- or long-term which you have highlighted as being key moments in your life. Perhaps in your current situation, you may be looking to build a solid financial foundation. You could be developing a rainy-day fund as well as aiming to pay for lifestyle choices such as holidays or a new car. Further down the line you may decide you wish to buy your first home. You could be wanting to start a family. You may even have greater ambitions within your personal and professional life. Looking ahead long term, there is retirement. All of these goals require some kind of funding in one way or another, and you will want to be prepared for them.

Investing creates the opportunity to meet these goals you have set throughout your journey. It allows you to reach financial milestones and work towards events within your life. Of course, it is dependent on the goals you set which will affect just how much you can benefit. Investing is for the long term, and so the longer you invest, the greater the potential amounts.

Retirement

Retirement may be considered a long-term goal as mentioned above, and so it is possible some people may invest in order to achieve this sooner rather than later. However, it is important that everyone begins to consider that retirement will happen one day.

At the point of retirement, the work income stops. It may come to be that you will have only have savings and your pension to live on. Therefore, you will want to ensure you are in the best financial position you can be. Whilst you may think it’s too early to be worrying about retirement, it is never too soon to prepare.

Investing is an effective way to prepare for when retirement eventually happens. Investing for the future will allow you to create a larger nest egg, giving you a much more comfortable amount to retire with and a greater sense of financial freedom. There are even investing accounts created specifically for retiring, meaning it is easy to do and can be started today. It is probable you would have begun to save for the day anyways, so why not try and create a bigger pension. You will thank yourself when the day comes!

 

All in all, there are a whole host of reasons as to why you should invest. We have highlighted just some of these, despite there being so many more as to why investing really should be something you are doing. By investing, you are putting your money to work. It will no longer be losing value but creating opportunities for it to grow, which could increase your wealth. Not only that, but it can help you to achieve your goals and prepare for the later years of your life.

There really is so much to investing and it should be an important consideration in your financial lifestyle. Investing can lead you towards a pathway of success and a brighter future, all of which you are creating today!

 

 

 

 

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