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Why Should We Invest Our Money?

Updated on April 13, 2012

Do You Save Money? What Do You Do With Them?

There are many stories when investors lose big chunks of their hard-earned money in the stock market when the economy is going "mayday! mayday!".

Once people learn of these stories, they'll automatically be afraid and would like to stay away from this "evil" stock market for good.

Well, this is of no surprise. After all, this is our natural instinct which acts to protect us from danger.

BUT if you stay away from all sorts of investments and keep all your money in a bank savings account, you'd better think again. Let me tell you this: there will be another EVIL lurking...which bites you hard when the time comes!

So either way, you'll be facing an Evil Villain (losing $ in stocks or facing inflation) and you've got to choose which to face! Read on to find out which one is best to face.

Saving Money Under Mattress
Saving Money Under Mattress

What Does The Norm Do?

Normal people keep their money in safe places

You work hard every day, month and year and you manage to squeeze out some portion of that to be saved. Would you let anything happen to this hard-earned money of yours?

No, of course! And the easiest way to save them is via bank savings account or fixed deposit (although some save it under their mattress!). Some others simply rely on their employee's pension fund (EPF).

Well, this is what the majority of people normally do. BUT are these measures enough to ensure your "survival" when you retire? Hmm, probably just for a few years!

Just a few years? Why? It's all because of the EVIL that lurks under your nose - Inflation!

Interest Rate of Regular Savings Account
Interest Rate of Regular Savings Account

The EVIL Inflation

See why inflation is of concern to you!

According to Investopedia, inflation means "the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling".

It is an undeniable fact that inflation is hitting you, no matter which country you're from. The money you have today simply can't buy the same amount of things in the future. In other words, your buying power is decreasing.

Generally, the average inflation rate in most countries is 5%. And how much of interest does regular bank savings account gives you a year? Less than 1%! (pic) How is this kind of interest going to keep up with the 5% rate of inflation every year?

Your money is going to get smaller and smaller and smaller in the savings account. Do note that the 5% I've used is the average between developed country and developing country. Check out the links below.

Beating Inflation With Least Risk
Beating Inflation With Least Risk

How Do We Beat Inflation?

Through Investment!

Yes, only Investment can beat the Evil Inflation. There are many vehicles of investments and not all are as risky as the scary stocks / shares. Generally, the APPROXIMATE returns that investors will get in various investment vehicles are as follow (from lowest risk to highest risk):

1. Bonds/Bond Fund - 6-8% per annum (Corporate bonds offer higher returns but has higher risk than government bond)

2. Properties - 10%-20%

3. Equity Fund -10-30%

4. Equity/Share/Stocks - 10%-100% (or more!)

5. FOREX, Options, Commodities, Hedge Fund - Even more but very high risk!

[These are just approximate percentages. Check with your local banks or brokerages for more accurate percentages]

DK's Investing Basics
DK's Investing Basics

Equip Yourself With Knowledge!

Learn how to lower investment risks!

Rather than saving money in the bank, one should invest his/her money to beat inflation. BUT before one does that, he/she should equip himself/herself with KNOWLEDGE.

With knowledge, one is in control of his/her money. With knowledge, he/she would assess his/her own risk tolerance and he/she could analyze the risks of each type of investment so that he/she knows which to invest in. By doing so, he/she could lower the risks to a minimum. With knowledge, an investor knows exactly what he/she's doing!

How to get such knowledge? Well, through reading and experience of course! For starters, there's loads of books at the bookstore to choose from, like the one here(pic). To know which to start with, click on the link to my Lens below. And after reading up to a certain extent, you should start playing the "game" in order to gain some real experience and skills.

Check out these books - @ Amazon

Video 1 - Investing for Kids - Great Cartoon about Investing for Your Kids!

Video 2 - Investing Basics Tutorials - with Zecco Zirens

Conclusion - Avoid Inflation

No matter what you do, inflation will be there to stay.

Yes, the risk of losing your money in a stock market (when it goes down) is a BIG risk BUT with Financial Knowledge, one can surely minimize this risk to a minimum. By doing so, you will be able to defeat Inflation, which is certain to grow each year with an average of 5%! Whether you invest or not, inflation WILL be there! So why don't you invest?

And what are you waiting for? Grab a book and start learning the basics!

POLL - Money Matters - What do you do with your money?

Before reading this, how do you deal with your money?

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If you've enjoyed my Lens, don't forget to Like it! TQ

What's In Your Mind? - Let us hear it!

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      ForexArena 3 years ago

      With interests rates so low, you can't afford to keep you money in a bank. To diversify, you can place a portion of your savings in different markets. One is the Forex market -- the world's biggest at a staggering $5+ TRILLION daily (and growing)! Even the crumbs are gold in that market.