Getting Started – Why invest

This is one of the easier questions to answer in Getting Started series. Investing allows you to grow your savings and is a critical part of your Roadmap2Retire.

Cash is useless!

Being in possession of cash gives you a false sense of security of richness due to its dwindling nature. Cash always loses value over time due to inflation. The way modern economics works and how the central banks tweak their policies is to always have some inflation in modern society. Just letting your cash stay in a bank savings account and accumulate interest is also not enough for a secure financial future, as these savings rates are almost always paltry and lag the inflation rates. It is important to look to other ways to grow your coffers more than the inflation rate – which is where investing comes into play.

Income can be achieved in two ways; usually classified as active and passive income, the latter of which is the goal of investing.

  1. Active Income – You work hard and you are paid in exchange of your time in providing the goods or services. 
  2. Passive Income : The money generated through investing can involve two methodologies.
    • You buy something that increases in value over time
    • You make your money work for you to generate more money
Investing can occur in various forms – some may invest in real estate (either buying a house where the value may increase, or as an investment property which can be rented out to generate income), some buy gold or invest in the stock market while others others invest in collectibles such as jewelry or art. This blog talks in detail about investing in the stock and bond market – as it is one of the easiest ways to invest without too much initial capital needed (compared to real estate, collectibles, art etc). 
However, it should be clear that every investment comes with an inherent risk; and without risk, there is no reward. So, it is imperative that the potential investment undergo thorough analysis and should match your appetite for risk.

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Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

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