Investing can feel overwhelming at times – there is a plethora of articles, complicated charts, and a seemingly never-ending abundance of others’ knowledge to sift through. But at its core investing is simply using your money to earn more money, usually over time. Whether you are investing in your retirement, a future home, a future education, or for your own financial independence, Why Should You Invest?
The primary motivation for investing is to grow your money and stay ahead of inflation. While it may feel more “secure” to keep money in a bank account, your purchasing power will diminish over time due to inflation. Investing allows your money to compound (which means after you get a return, you start earning a return on your return), ultimately leading to much larger growth over a long period of time. Every investment carries risk. Generally speaking, the more potential return, the more risk is likely involved. Stocks typically have high returns but are prone to volatility, while bonds normally provide a stable return but are unable to achieve the same returns as stocks. It’s up to you to weigh risk and return based on your financial goals, time horizon, and personal preferences. For instance, young investors generally can take more risk because they will be around long enough to recover from down markets. Diversification is a true rule of thumb for investors. It refers to a method of ‘spreading’ your money around different classes of assets and sectors in order to lower risk. When one investment declines, another has the potential to increase in value and normalize the returns of your total investment portfolio. A simple portfolio for a beginner might look like the following: You can eventually change the mix of your allocation based on your age, goals, and risk profile. Investing successfully is not about making money quickly and getting in and out of the market at the right time. Successful investing is about being consistent and patient. The markets we experience will have highs and lows over the years; however, history has shown that the markets always go up in the long run. The most successful investors are concerned about time being invested in the market, and not about timing the market. Regular contributions to your account—even if they are small—will make a positive impact on your portfolio when compounded over time. Consider establishing automatic monthly investments as a way to keep discipline and a consistent, steady growth of wealth. Investing isn’t just for the wealthy or financially savvy — it’s for anyone who wants to take control of their financial future. With patience, discipline, and a willingness to learn, even beginners can become confident investors. The earlier you start, the greater the rewards of compounding and long-term growth. So don’t wait for the “perfect time” — start investing in your future today.
Knowing How to Weigh Risk and Return
Creating a Diversified Portfolio
Investing for the Long Term
Getting Started: Practical Steps
Conclusion
