Why Should You Start Investing Now?
Amid the current global economic situation and the impact it’s currently having on inflation, declining purchase capacity against rising prices, and our lives, you usually tend to ask yourself one question; Should I continue spending, or should I save? Of course, if you ask economists, they would tell you to be safe at this troubled time and deposit your excess cash in a bank rather than spending it on overpriced commodities.
Investing is an effective way to put your money to work and potentially build wealth. Depositing your money in a bank is a minimal-risk investment that ensures your capital maintains its value against inflation. Yet, with the current crazy inflation rates, it’s becoming, to a certain extent, ineffectual, with inflation growing at a faster pace against bank interest.
So, bank deposits are only part of the story. Savvy savers start by building sufficient emergency savings within a savings account or investing in a money market account. But after building three to six months of easy-to-access savings, investing in the financial markets, startups, real estate, and similar investment vehicles offer many potential advantages.
Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff. In simpler words, a higher-risk investment usually yields a higher return.
Taking a step back, there are two ways to make money in our modern world. The first way is to earn an income by working for yourself or someone else. The other way to grow your fortune is to invest your assets so that they increase in value over time, depending on the risk grade of your investment and the promised return.
Whether you invest in stocks, bonds, mutual funds, options, futures, precious metals, real estate, startups, small businesses, or all of the above, the objective is to generate cash. This can come in the form of increased value to the investment, dividend income, the sale of a business, or some other liquidity event.
Brown Dog Financial Planning lays down four main reasons, which we find to be straight to the point, as to why you should start investing:
1- Investing Makes Your Money Work for You
To earn more income, there are two ways to make money. Either you work for your money, or your money works for you. For example, you could watch it grow by investing wisely instead of keeping it in a bank account, offering minimal interest rates.
Investing doesn’t typically bring significant returns overnight, but if you are prepared to play the long game, there are rewards in store. It is better than your money decreasing in value over time, or worse still – being spent.
2- Invest to Beat Inflation
Due to inflation, it is an economic certainty that the money you made yesterday will buy you less tomorrow. For that reason, you must make your money grow and save it from being devoured by rising inflation.
3- Plant a Seed and Let It Grow
Intelligent people use their capital (however small) as a solid foundation to earn more money. You can do the same by investing and using your money as a tool to build wealth rather than earn it and then spend it. The power of compounding on that small starting amount can be incredible.
4- Plan Your Retirement
Retirement is a time to enjoy the fruits of your hard work, not to scrimp and save, and it starts with investing now. For this reason, it is wise to allow your money to grow so that when you retire, you have a good pot of money to enjoy your later years.
The bottom line, it’s never too late to become an investor. You may be well into middle age before realizing that life is moving quickly, requiring a plan to deal with old age and retirement. Fear can take control if waiting too long to set investment goals, but that should go away once you put the plan into motion. Remember that all investments start with the first dollar, whatever your age, income, or outlook. That said, those investing for decades have the advantage, with growing wealth allowing them to enjoy the lifestyle that others cannot afford.