Why should you invest?

+28 votes
asked Apr 19, 2015 in Culture & Society by RolandoIsabe (240 points)
retagged Sep 17, 2015 by Morgenstern
I'm a college undergraduate, and I keep wondering, why should you invest? To me, investing in any market leads to loss of money most times. Is there a need to invest?

2 Answers

+13 votes
answered Jun 20, 2015 by Aleksandra (1,160 points)

More and more people are getting involved with investing these days. Well, some of them might be jumping on the bandwagon, but others, most people, I believe they are making a reasonable choice. Here are 3 reasons why you should invest.

1. Investment provides the capital to live a happy life.

The possibility of not having to work again for the rest of your life is one of the major reasons why you should invest now. By proxy, the two ways to make money is life is by working and by making your money work for you.

Putting your money in your pocket will not earn you any more money. When you invest, you will always have some interest from the money you have invested.

There are several ways you can invest your money to make it work for you. Some places to invest are in mutual funds, bonds, stocks, futures and options, real estate, precious metals, your personal business, any combination of the above mentioned investment options, and the goal remains the same: to have investments that will generate more money in the future.

It doesn't matter what your goals are-sending your kids to the best schools or retiring on an expensive yacht in an island-investment is important to helping you achieve your goals.

2. Investment can protect you against inflation.

Small savings that will take care of certain emergencies can be kept in the bank, but when you are saving for a long-term project, it is important to keep yourself protected against possible inflation. You will sometimes need to take some risks to enjoy higher interests in the future.

3. Market risk is only one very important risks among many.

The biggest threat to your pocket is not losing money in the stock market. People outlive their savings when they fail to save up enough money. Those who make very save investments and refuse to invest in anything else risk losing their money's value during inflation.

The bond and stock market are very vast, so, with adequate learning and observation, you will likely avoid some risks. There are different investment options you can combine to meet your goals and avoid excessive risks. High yield investment options often come with higher risks.

+8 votes
answered Jun 30, 2015 by KatherinaKit (350 points)
edited Sep 17, 2015 by Morgenstern

As in the first answer has argued, people should invest for their own good. I agree to that. And I’m glad that even now you are just an undergraduate, you notice the question of investment. ‘Cause I believe people in their twenties are most suitable for most investment options, even with their low salaries and college debt.

1. Young people have plenty of time which is essential for investment

  • The more time they have, the more possible that the investment will make more profits. Young adults have the advantage of time, even though money may not be easily available to them. According to Albert Einstein, he once referred to compounding-the act of reinvesting your profits to grow savings as the eighth wonder of the world for a reason. Investors are allowed to amass wealth over time, with only two things: time and the reinvestment of their earnings. For instance, an investor who invests $10, 000 only once at the age of 20 would have more than $70, 000 by the time he is 60 years old going by the 5% interest rate. But investing that same $10, 000 at age 40 would only generate $26,000 by the time the investor’s 60. This shows how wealth grows with time-the longer the period of investment, the more earnings the investor gets.
  • They have more time to recover from mistakes. Every young investor has the time and flexibility to learn the rudiments of investing and learn important lessons from his successes and failures. Because investment has a lengthy curve, young adults have the advantage of studying the market for some years, to enable them refine their strategies for investment. Younger investors are able to recover from investment failures and mistakes with time.
  • They can take higher investment risks (which means better profits) with earning years ahead of them. The amount of risk an investor can withstand is influenced by his or her age. Young people can afford to take higher investment risks with several earning years ahead of them. People whose ages are close to their retirement age often opt for low-risk or risk-free investment options, while younger adults build intimidating portfolios by investing in more risky options.

2. The new generation have the capability to invest even when they are still young

  • Most of them are Tech Savvy, and they are quick in learning. The younger generation is more tech savvy, willing to learn, carry out researches and apply different online investment techniques and tools. Trading platforms founded online provide numerous opportunities for both technical and fundamental analysis, as well as educational and financial websites. Technology, such as online opportunities, apps and social media platforms, can all boost the young investors’ experience, knowledge base, ultimately, confidence, and expertise.
  • By Investing, young people are treating themselves as human capital. From an individual perspective, human capital can be said to be the current value of every future wage. Earning ability is important to saving and investing for future retirement. Just as investing in yourself by earning a degree or learning advanced skills or on-the-job training will produce higher future returns. Investing in the market is also a skill that worth learning and will enhance young people’s chances of earning much higher future returns. As you can see from above, young people actually have the advantages in investing and they should start their investment earlier. Hope it helps you to understand why should you invest!
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