Why Should I Invest?

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If you are asking yourself “Why should I invest?” you’re in the right spot. At InvestMoneyRight.com our focus is to educate you on the importance of investing and managing your money responsibly.

Let me start with my definition of investing:  Postponing current spending for a higher level of future spending.  Simply put, you invest your money so your money grows and becomes more money than you started with…a lot more!

Sounds good, right? So how does your money grow? When you invest your money, you’re investing in companies that use the money to help the company grow and make more money (profits).  By investing money in the company you take ownership in that company – this is why your money can grow.  You get shares in the company’s profits!

This also means you get shares in the company’s losses.  And losses can be big if you don’t know what you’re doing.  By using the right investment strategies and investment instruments, you can greatly reduce the risk of your investments.

So Why Should I Invest??

There are many reasons why you should invest your money:

  • Retirement – Unless you feel like working till you’re dead, it’s very important to invest a portion of your current income to fund your retirement years.  A small portion of your current income, invested on a monthly basis, can grow to unbelievable amounts.  This money is very important to have at retirement, when your current income is not available anymore.  Below you can find examples of what your money can grow into under certain assumptions.
  • Buying a Home/Vacation Home – Maybe you are like me and like to travel: Wouldn’t it be nice to use your investment money to purchase your own beach front condo?   You can travel between your two homes and even rent out your vacation home to make money off your investment property! Investing in property is most likely the biggest investment a person will make.  If done right, your house will appreciate in value and can be sold for more money.
  • Cars and Other Toys – Because of all your investing efforts, you finally have enough additional income to purchase that dream car you always wanted!  Or maybe your extra money will go to a boat, RV, motorcycle, etc.  Whatever you decide to use your investment money for is your choice, and if planned correctly can easily become a reality.
  • Education – Another great place to use your investment money is investing in your children’s college fund.  There are specific funds meant for college that can be opened for a young child.
  • BEST REASON TO INVEST?  TO BUILD WEALTH!!

Growth of $25 Investment at 10% Stock Market Return

Can you save an extra $25 a month?  If you can cut your budget by just $25 a month and invest that money in the stock market with an average return of 10%, you will be surprised how much money you may end up with.  Doing the calculations of $25 a month for 40 years is $25 x 12month x 40years = $12,000 investment.  By only investing $12,000 over a 40 year period at 10% return, your investment will grow to $158,101.98!  That’s over $146,000 in profit off a $12,000 investment.

How is that even possible?  The answer is compounding interestInterest can be thought of as rent that is received for borrowing your money, just like renting a house and receiving rent payments, interest is income from letting someone borrow your money.  Compounding interest is taking the interest earned and adding it to the principle (initial investment), making the principle grow at much higher rates.  Think of it like this – your interest you make is being reinvested and now your interest is making interest!

Below you can visualize how a $25 a month investment could change your life:

# of Years Investment Value
10 $5,121.12
20 $18,984.22
30 $56,512.19
40 $158,101.98

Now $25 a month is probably sounding a little too easy, huh?

Let’s see how much saving $100 a month and investing it in the stock market with an average return of 10% will get you, depending on your length of time investing: (Find these calculations yourself using this Time Value of Money Calculator)

  • 10 years = $20,484.49
  • 20 years = $75,936.88
  • 30 years = $226,048.79
  • 40 years = $632,407.95
  • 50 years = $1,732,439.08

$250 a month at 10% return:

  • 10 years = $51,211.24
  • 20 years = $189,842.21
  • 30 years = $565,121.98
  • 40 years = $1,581,019.90
  • 50 years = $4,331,097.70

ARE YOUR DREAMS BECOMING A REALITY?

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