There are several benefits of investing in stocks. Read to find out why investing is important, even for an average individual.
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Fear Of Investing In Stocks
If you’re fearful of financial risks, maybe the most important initial step is to only put down what you can afford to lose.
Say you only make $1,500 net monthly income. Can you afford $50-$75 monthly? Place a smaller amount into a long-term portfolio.
A plan involves one of two ways. You could do-it-yourself and invest in companies you know or use. Second, you could put money into a retirement IRA fund for example. This means an investment group puts money into different companies for you. The annual return could average 8% or more each year.
Have fear of investing in stocks?
Don’t fear. Simply place only money you could live without into an investment plan. Provided the financial abyss doesn’t affect your origin country, the money is able to grow over time. Stable companies that stick around are safest perhaps.
Putting income into a banking institution may feel the safest route. It provides too little in return though, meaning sometimes 0.01% interest monthly. Anyway, the FDIC insures against vanishing funds in the stock market. Keep in mind that the total investment may indeed be lost, for companies simply going under debt or default. That is not insured.
Now that some fear can be put out of the way, there are several reasons for investing that need to be covered.
Reasons To Invest In The Stock Market
Although numerous advantages exist, elaborated here are some of the top reasons to invest in the stock market.
Here are some rock solid reasons that have stood the test of time. They are not placed in specific order. Just know you have no need of further reasons other than these top few, if learning nothing else.
Initial Benefit Of Investing In Stocks
Solid future preparation. Through investing for yourself or someone you know, you pave the way to future success.
Let’s look to an example. Putting away just $1,000 becomes $21,725 in 40 years, at an 8% annual return of some long term fund. Imagine, this is just a one-time deposit of $1,000 that is left alone for 40 years. This result can be achieved with an IRA for example, an individual retirement account.
That’s a magnificent thought here! Again, a one-time deposit of $1,000 into a retirement account for a young person. Don’t touch it and it becomes magical after 40 years, maybe greatly beating the cost of living by that time.
$1,000 over 40 years? How about $5,000 over 50 years?
Maybe you have a kid or teenager. You begin a fund for them at 20 years old that can be withdrawn yearly beginning at 70 years old. That’s 50 years of a one-time deposit sitting around. If depositing $5,000 with nothing else, that’s $234,508 after the 50 years! All this at an 8% yearly return.
This number is astounding!
Great intelligence in picking stocks is absolutely NOT required. A balanced portfolio often found with a Traditional IRA or ROTH IRA is often enough. One of these two investment vehicles is great. Each may at least average 8% yearly over the long term.
Second Benefit Of Investing In Stocks
Beat much inflation. Don’t just save money idly. Put it to work for growth. Avoid the local bank cheapy rates and think bigger.
You need not let your money sit aside idle and depreciate by day. And you don’t need to deposit it into a bank to get the 1% of 1% returns monthly. Let it grow to a much greater degree. This is the more proper way to keep up with inflation.
Simply put, you may need or wish you had kept up with inflation. Bringing back 8% minimum yearly, at some later time, could make a huge difference.
Second, it may even be advantageous having no savings account at all and avoiding fees associated with one. Instead, put the money into a retirement savings fund and don’t withdraw from it.
Retirement account > bank savings account.
8% annual > 0.01% (1% of 1%!).
Exist with a checking account for expenses and avoid the savings account if possible. If the local bank doesn’t allow this and insists on a customer having both accounts, maybe it’s time! It may be time to watch over your money better and switch to a bank that is conformable to what you want.
Loyalty to a bank is one thing. Loyalty to monetary survival is another.
Need an emergency fund? A savings account is not essential. One could put a savings of $1,000 into a checking account or even some physical envelope.
For further motivation, a second reason to avoid a bank savings account is you won’t run into fees, such as holding fees. Some banks may charge $5 monthly if you don’t save enough. That could mean needing to always have $300, $500, or whatever amount is needed to be in the account.
Two reasons to skip bank savings. So there.
Third Benefit Of Investing In Stocks
Discipline with money. Begin with the right self-conditioning. Having pride alongside the proper mindset can shape a nice investing future. Confidence can blossom through having an appropriate beginning in the investing world.
If investing a lump sum just one time is possible whatsoever, confidence gained may lead to further gains by becoming strict with money. Saving and not spending on many unnecessary things can help quench the chances of future poverty or bad finance decisions.
Like physical exercise, this forms a habit. One could look upon whatever is held within an investment fund, take some pride in accomplishment, and make that a future stepping stone for building a bit more wealth over time.
Awakening to the concept of having good investment practice can bring stability. For the beginning investor, this is good enough reason to begin.
A stable investment can lead to wanting to build that sum over time.
Fourth Reason For Investing In Stocks
Invest in business. Believe in some business?
A company will many times begin as a private entity. When it decides to go public, all owners involved kind of degrade their full monetary power in order to get more capital from the entire market, or the populace that wants to invest alongside them.
A neat concept to be sure. It’s a technological way of old-fashioned “raising funds” for an issue. In this case, the issue being business.
If you believe in some company or want to take part with them in ownership of the company, buying some shares of stock will do the trick! Taking pride in a company you believe in may lend itself toward the future, and investing with the company over the long term.
It may be kind of exciting to watch as a company grows over time.
Sharing in this company growth over time, can be a motivator for the 8% yearly growth already mentioned. It’s nice to grow with some company that is at least believed in somewhat.
Alternatively, invest in stable businesses. These may have better chances of surviving than others, and may fare better than lesser businesses.
Fifth Reason For Investing In Stocks
Leave money behind. If you have others you care about, consider investing in order to leave something behind after you’ve past on. This can be a great caring action for people special to you.
A second way of doing this. As mentioned before, give $1,000 for a child-investment lump sum of money. This can be over $20k in forty years. That would be a great gift for a young person special to you.
Third, the power of example. You can also leave money lessons behind to the young ones in your life. The young are formable and can learn to invest through your example. Seeing a young person in your life gain financial knowledge can be satisfying indeed.
To summarize these five benefits of investing…
1. Future preparation
2. Beat that inflation
3. Money discipline
4. Company beliefs
5. Leave money behind
Why Investing Is Important
A huge consideration. If you don’t think this subject is important to one’s welfare, then consider working more. For instance, one has a certain amount of hours in each day and can only work for income so much. Through investments however, money can work hard over time and grow passively.
Understanding this, you would likely prefer the passive growth of investing over working more hours for years and years to come.
This is a huge part (or perhaps everything) of why investing is important.
If you remember one thing here, this concept would be great to grasp. Let that money work hard for you over time, instead of working hard for endless years.
Uniquely, this investment fund can be used ahead of time before retirement. One reason for this is not having an emergency fund built up just yet. Say something unforeseen occurs. You may be able to get at these funds. A fee may be involved, but the money may be absolutely needed anyway.
Understanding the many points of this page can hopefully help with grasping the power of stock investments or retirement accounts. Thanks for reading.
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