Tuesday, January 22

Why Is Investing Important?

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Why is investing important? It’s a good question. If you’re already trying to manage a budget and pay down debt, you might wonder why you have to add another financial task to your to-do list. But this one might be the most important of all.

Investing is essential to good money management because it ensures both present and future financial security. Not only do you end up with more money in the bank, you end up with another income stream. Investing is the only way to achieve both growing wealth and passive income.

What is investing?

Investing means to use your money to make more money.

Technically, anything that generates a return is an “investment”. This means even your savings account generating 1% interest is an “investment”. However, when most people talk about investing, they are referring to higher return investments like mutual funds, ETFs, and stocks.

Why is investing important?

Investing ensures present and future long-term financial security. The money generated from your investments can provide financial security and income.One of the ways investments like stocks, bonds, and ETFs provide income is by way of a dividend. This is an amount paid to shareholders simply for holding the investment. Because many investments pay monthly, quarterly, or annual distributions, you can enjoy passive income that ultimately could replace your paycheque.

If you want to retire or become financially independent, investing is the way to do it.

How do I start investing?

In order to start investing, you’ll need to open what’s called a brokerage account. This is different than a bank account, though large banks might also offer brokerage accounts. However, you’re likely best off choosing a discount online brokerage.

Online brokerage accounts make investing in the stock market more accessible than ever. There are tons of online resources to build and manage your investment portfolio, whether you’re investing in the USA or Canada. Most brokerage accounts require at least $1,000 to open and start investing.

Most twenty- and thirty-somethings are afraid of investing in the stock market. I can’t emphasize enough how much opportunity there is to really kickstart lifetime wealth-building if you start now. It doesn’t even matter if you don’t have a lot of money to contribute, because time is on your side. Once you open that brokerage account, even as little as $100 per month can help your portfolio grow.

How to learn to invest in the stock market

I teach a comprehensive self-paced eCourse called The Six-Figure Stock Portfolio that teaches people how to build a $100,000 investment portfolio, even if they’re starting from scratch. If you’re brand new to investing and want to do it right, this is the only guide you need.why is investing important

The program is entirely online and consists of text, videos, and 1-hr classes on specific stock market topics. I teach everything I learned in my MBA in Finance, plus my best strategies as an investor, to help you build the portfolio of your dreams. If you’ve ever felt intimidated or scared of the stock market, but know you need to invest to get ahead, this is exactly what you’ve been looking for.

A $100,000 portfolio is NOT too good to be true. In fact, it’s just the beginning!

What should I invest in?

Any investment is better than none, but you need to choose carefully. Generally, the higher a return offered by an investment, the greater the risk of losing your money. In order to protect your wealth, you want to hold a mix of high- and low-risk investments. In other words, don’t keep all your eggs in one basket.

You want to allocate a certain amount to cash, ETFs, bonds, and common stocks of varying degree of risks. Your investments will be diversified in purpose, with some focused on capital growth and others on generating income. You might even make some investments just for fun, like investing in Bitcoin. However, for speculative investments like cryptocurrency, make sure you’re not investing anything you can’t afford to lose!

RELATED: Everything You Need to Know Before Investing in Cryptocurrency

Why is investing important? Investing is the secret to achieving your financial goals.

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About Author

Student debt killer, super saver, and stock market addict. BSc. in Chemistry from the University of Alberta, MBA in Finance from the University of Calgary, and PhD from the school of life in being a badass. Currently residing in Calgary, Alberta, Canada, but hooked on travelling.

4 Comments

  1. I remember talking with one of my girlfriends brothers a bit about investing. He’s in his early 20’s and when we got on the subject of the stock market he was concerned about losing money. I tried to explain to him that short term the money could go down but over a long term horizon (like 10 years) you are very likely to have more money. If he didn’t, he’d probably have bigger issues on his hands like fending off rival human tribes for food and shelter. ^_^

  2. I love this, this is like one of those opener questions that a professor would ask at start of an Investments class. Investing is important because it forces you to get out of thinking about just the short term. If you’re good at investing, the calculated risks you are taking have been analyzed, and you are comfortable with the potential rewards your investment will generate. Personally, I am a big fan of small businesses too, though at the moment, I just sold both of my small businesses, so I need to find something new!

  3. Any advice where I should open a basic mutual fund account? I just graduated university in Toronto and trying to organize my finances.

    • ING Direct (soon to be Tangerine)!

      Their Streetwise funds are a great way to get started investing. That’s where I bought my first mutual fund, and I still hold streetwise mutual funds in my RRSP with ING. The fees are relatively low compared to most funds and the portfolios are well diversified. It’s really easy to get started and contribute regularly (I just have an automatic transfer every month from my chequing to my RRSP Streetwise mutual fund). More information is here: http://www.ingdirect.ca/en/mutualfunds/

      When I signed up, I really like the quiz-thing they make you take to determine what kind of investor you are. It really helps to select the best investment for you when you’re new to investing.

      If you don’t bank with ING yet, you can get a $50 bonus for opening an account with my Orange Key 32251507S1

      Hope that helps =)