Simple, one should invest in order to build on their wealth (and probably thereby achieve financial freedom). The objective is to generate additional cash/income. Investing refers to long-term commitment, as opposed to trading, gambling or speculating, which are short-term and are subject to high risk.
What happens if you do not invest?
There are two ways to make money, either by working (for yourself or someone else), and/or having your assets work for you. If you keep saving your money instead of investing, you’ll never have more than what you save or receive through inheritance. Simply put, you will miss out on opportunities to increase your financial worth. Add to that, the chances of depreciating value of money overtime.
Conversely, investing has the potential to grow your money. The income that results from investing can come in many forms including financial profit, interest earnings, dividends, appreciation of asset value etc. However, investing also has its risks, and one has to carefully choose the right vehicle to invest.
Here are top five reasons to invest your money:
- Grow your money
- Beat inflation (a general increase in prices and fall in the purchasing value of money)
- Retirement corpus creation
- Tax saving
- Accomplish financial goals
Where to invest?
One has to choose an asset class to invest, depending on the risk they’re willing to take and the reward/return they’re expecting. An asset class is a category of investment with particular risk and return characteristics. The following are some of the popular asset class or the types of investment options available:
- Real Estate
- Precious metals/stones (Gold, Silver, Diamonds etc.)
- Fixed income instruments
- Mutual Funds