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Investing is a technique of building wealth, but it's not only for the wealthy. Anyone can start investing, and various flexible vehicles make it easy to begin with small amounts, and building a portfolio eventually.
Investing is a technique of building wealth, but it's not only for the wealthy. Anyone can start investing, and various flexible vehicles make it easy to begin with small amounts, and building a portfolio eventually. In fact, what differentiates investing from gambling is that it takes time--it requires patience.
Investing is the act of committing money or capital to an endeavor, with the expectation of obtaining an additional income or profit. Investment is important to accomplish one's financial goals and provides buffer for unforeseen expenses that may arise in future.
The income that results from investing can come in many forms, including financial profit, interest earnings, or appreciation of asset value. Investing refers to long-term commitment, as opposed to trading or speculating, which are short-term and, therefore, amount to higher risk. Intelligent investing is the key to build wealth. Investing always contains risk as the business you invest in could go down in value or even close down completely. It is critical to research the business and analyse the risk before putting in your money.
Why should you invest?
In order to build wealth, you should invest your money. If you don't invest, you will miss out on opportunities to increase your financial worth. Needless to say, you have the potential to lose money in investments, but if you invest wisely, the potential to gain is higher. If not invested, the buying power of your money will depreciate overtime.
Top reasons why you should invest your money are:
1. Wealth Creation - Investing your money will allow it to grow. Most investment vehicles, such as stocks, certificates of deposit, or bonds, offer returns on your money over long term. This return allows your money to compound, earning money on the money already earned and creating wealth over time.
2. Beat Inflation - 100 rupees today would only be 96.5 rupees next year according to recent Indian inflation statistics, which implies that you would lose 4.5% of our money every year if kept as cash. Returns from the investment helps maintain the purchasing power at a constant level. If you don't beat the inflation rate you'd be losing money, not making money.
3. Retirement corpus creation - A person should invest while he is earning so as to create a corpus of funds that can be used when one retires. This retirement fund accumulates overtime and provides security to maintain a comfortable life-style even after retirement.
4. Accomplish financial goals - Investing can help you reach bigger financial goals. This return on your investments can be used toward major financial goals, such as buying a home, buying a car, starting your own business, or putting your children through college.
5. Tax-saving - Some investment vehicles give a double return by providing returns as well as reducing your taxable income, which in turn minimizes the tax liability such as equity linked savings scheme (ELSS) funds. Money saved is money earned which can be invested further.
It is wise to invest, this little step can take you and place you in a better place than your mates.