Does the idea of investing seem daunting, intimidating, or even a cut above your pay grade? Well, it’s time for that to change.
Everyone can and should invest their money. Moreover, they should have started yesterday. Indeed, investing as little as $5 a day over 50 years could turn you into a multimillionaire!
Are you looking for further incentives to begin your foray into the wonderful world of investing? Allow us to help. Keep reading to discover 6 awesome benefits of investing your money.
1. You’ll Generate Wealth
First and foremost, investing money is one of the best ways to generate wealth.
It doesn’t matter whether you invest in real estate, stocks, and shares, or even gold! Your net worth will increase much quicker than it ever could through saving alone.
This is largely to do with the wonders of compound interest.
Remember the example in the intro? The reason you’d become a multi-millionaire is that your money would accrue interest every year. Assuming you left all of it in the market, you’d see the numbers snowball as time went by.
Here’s an example: an initial $1000 investment would turn into $1100 after year 1 (at a 10% annual return). At the end of year 2, you’d have $1210. Let that play out over decades and you’d become very wealthy indeed.
2. You Earn Money on Autopilot
One of the biggest reasons to invest your money is that the wealth you generate happens on autopilot. Sure, you might have to adjust your investments, move money around, and keep adding to your portfolio over time. For all intents and purposes, though, you’re earning passive income.
To put it another way, your net worth increases in the background at all times (even when you’re asleep)! You’re not exchanging time for money anymore, which is the greatest sacrifice anybody can make. Put your money into the market and it will handle the rest.
The result? You can get on with your life and fill your invaluable time with the things you want to do. You take control of your finances as opposed to the other way around.
3. You Can Retire in Comfort (and Early)
Worrying about money is the last thing you want to do when you retire. After decades of hard work, you want to sit back, relax, and enjoy your golden years!
Alas, the majority of retirees struggle to make ends meet- let alone go traveling, take up a new hobby, or spoil their grandkids. Many are forced to keep working long after they turn 66; some even have to go back into employment a few years after retiring.
Investing from an early age is one of the best ways to avoid this fate- especially if you start early.
As we’ve seen, compound interest can deliver incredible results. Yet it needs time to work its magic. The earlier you start investing, the more you’ll have in your account for your retirement.
4. You’ll Beat Inflation
Have you ever wondered why products get more expensive every year? Your money never seems to go as far as it did before, right? It’s all to do with inflation (the economic term that describes this exact phenomenon) and interest rates.
For the money in your savings account to maintain its value, interest rates must match the rate of inflation. For your money to grow, interest rates must exceed the rate of inflation. But if the opposite happens (whereby inflation exceeds interest), then your money will decrease in value.
Investing your money is an effective way to avoid that last option! Why?
Because some investments deliver up to 10% annual returns or more. That means a $1000 investment would be worth over $1,100 twelve months later. These numbers are ten times higher than current rates of interest, helping you outperform inflation every single time.
5. You Can Mitigate Risk
Many people feel that investing is far too risky to justify. It’s understandable! After all, markets crash, companies fold, and economic uncertainty is rampant.
The good news is that there are numerous ways to reduce the inherent financial risk involved. For example, you can spread your bets by diversifying your portfolio and work with financial planners who understand the systems in play.
You can also find investment opportunities that are much lower-risk in nature.
Bonds provide a perfect example. Investing in bonds involves loaning money to entities such as governments and municipalities that are trying to raise money for certain projects.
The returns on investment will be smaller. However, the income they provide is all-but-guaranteed because the type of borrower involved will very rarely default on their loans. That’s good news for anybody who’s worried about losing money.
6. You Don’t Need Lots of Money to Start
Another common misconception about investing is that you need money to start. People assume that investing’s a rich person’s game; that the average individual could never do it.
This couldn’t be further from the truth. Of course, having access to capital makes a difference. With money to burn, you can take bigger risks, get the ball rolling, and start accruing larger sums of interest far sooner.
Recall our example in the introduction again though:
A measly $5 daily investment can deliver staggering amounts of wealth! Sacrificing your daily coffee from Starbucks could turn you into a millionaire. Start now, even if you have to start small, and you’ll reap the financial rewards down the line.
Don’t Forget the Benefits of Investing Your Money!
The world of investing can seem off-limits when you’ve never done it before. It seems complicated, confusing, and risky. You worry about making mistakes, losing your hard-earned money, and ending up in a trickier financial situation than the one you’re in already.
These concerns are both reasonable and understandable. However, we hope the benefits of investing that we’ve discussed in this post have changed your mind and revealed the possibilities on offer! Embrace investing, learn more about the topic, and the potential rewards can be enormous.
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