Why Should You Invest
The purpose of life is to have a happy & peaceful life. To live comfortably you need to have money. You need money to fulfill your basic needs. You need money to buy food, you need money to live, you need money to get medicine when you get sick, you need money to relax, and you need money to travel. To fulfill our daily basic needs most of us do a job. You get a monthly salary from your job & you spend a portion of your income to have basic needs.
The problem with having a job is that you cannot do a job & make money until you die. You can only have a job for some time. with get old you don’t have the energy to do a job, and you don’t have the physical strength or capability to do some tasks. Your productivity is getting lower by lower when you get old. Without having a job, monthly income, or paycheck you have to create a way to generate money.
That is why we need to invest our hard-earned money to have a comfortable retirement. If you only spend money without saving & investing, you might not have enough to live comfortably when you stop working.
Another benefit of investing money is growing your wealth over time. the beauty of investing is that your money produces more money for you. You have nothing to do with this process because money works for you. If you don’t invest, inflation might lose the value of your savings. So, just saving money is not going to make you rich. You have to invest your savings wisely.
The Different Type of Investment You Can Make
There are different asset classes you can invest your money. You can invest in stocks, real estate, bonds, businesses, etc. Our main object here is to have a comfortable retirement with our investments. The purpose of a comfortable retirement means you don’t have to worry about money for the rest of your life.
To have such kind of lifestyle I think that having a well-diversified investment portfolio is the best solution. A diversified investment portfolio means you can allocate your money to stocks, gold, bonds, real estate, personal businesses, etc.
1. Stocks
- The stock market has given a 10% average annual return for the last 50 years or so. So, we can expect for the next 50 years we can have such return from stocks. If you are an active stock market investor you have to study each stock one by one, you have to read books, and annual reports, and listen to world great investors’ interviews, a lot of work to do. But a person like me enjoys this kind of work & I study every day to improve my knowledge.
- But if you are not a person like me, not interested in selecting individual stocks you can invest your money in an index fund. The S&P 500 is a good index to invest your money if you are interested in stocks. The S&P 500 index is an index that includes the 500 largest publicly traded companies in the United States, covering various companies in various industries.
- Investing in an S&P 500 index fund is a very easy thing to do. You can buy shares through a brokerage account. The most fascinating fact is that 95% of actively managed mutual funds in the USA were unable to beat the S&P 500 index fund return over the long term. As individual investors investing in such an index is a good way to start.
2. Bonds
- Bonds give fixed interest payments for a fixed period. You can buy government bonds or corporate bonds. The main thing you need to consider before you invest in a bond is that the bond return should beat the inflation. If the inflation rate is 3% & the interest payment is 2% you should not buy that bond.
3. Gold
- Gold is a good protection against a hyper-inflation environment. Most billionaires use gold as a shield in an inflationary environment. The hedge fund manager Ray Dalio has allocated 5% of his hedge fund in gold. But when it comes to Warren Buffett, he is not a fan of gold. He says that gold is a non-productive asset class that doesn’t produce anything. But the final decision is yours.
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