Investing is a tool for building wealth, it means putting your money to work for you. Actually, it’s a different way to think about how to make money.
Growing up, most of us were taught that you can earn an income only by getting a job and working. And so that’s what most of us do. But there’s a limit to how much we can work and how much money we can make out of it.
So, since you cannot create a duplicate of yourself to increase your working time, you need to send an extension of yourself, your money to work. That way, while you are putting in hours for your employer’s work, you can also be earning money elsewhere. Making your money work for you maximizes your earning potential.
There are many different ways you can go about making an investment, this includes putting money into stocks, bonds, mutual funds, real estate, gold etc. The point is that no matter the method you choose to invest, the goal is always to put your money to work so it earns you an additional profit.
What investing is not?
Investing is NOT gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. In fact, what differentiates investing from gambling is that it takes time, it is not a get-rich-quick scheme. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a ‘hot tip’ you heard at the water cooler is essentially the same as placing a bet at a casino.
A ‘real’ investor does not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still is risk, and there are no guarantees, but investing is more than simply hoping luck is on your side.
Why bother investing?
Obviously, to earn more money. Investing is becoming less of an extra thing to do and more of a necessity. For the average person, investing is the only way they can retire and yet maintain their present standard of living.
By planning ahead you can ensure financial stability during your retirement.