Four Really Good Reasons to Consider Investing (2024)
Forty-six percent of Americans do not own any stocks or stock-related investments, such as mutual funds, according to a recent Gallup poll1.
Individuals may cite different reasons for not investing, but with important long-term financial goals, such as retirement, in the balance, the reasons may not be good enough.
Make Money on Your Money You might not have a hundred million dollars to invest, but that doesn’t mean your money can’t share in the same opportunities available to others. You work hard for your money; make sure your money works hard for you.
Achieve Self-Determination and Independence When you build wealth, you may be in a better position to pursue the lifestyle you want. Your life can become one of possibilities rather than one of limitations.
Leave a Legacy to Your Heirs The wealth you pass to the next generation can have a profound impact on your heirs, providing educational opportunities, the capital to start a business, or financial support to your grandchildren.
Support Causes Important to You Wealth can be an important tool for impacting the world in a meaningful way. So whether your passion is the environment, the arts, or human welfare, you can use your wealth to affect positive changes in your community or around the world.
A Framework for Investing
The decision to invest is an acknowledgement that it comes with certain risks. Not all investments will do well and some may lose money. However, without risk, there would be no opportunity to potentially earn the higher returns that can help you grow your wealth.
To manage investment risk, consider maintaining a broad diversification2of your investments that reflects your personal risk tolerance, time horizon, and the nature of your financial goal.
Because investing can be complicated, consider working with a financial professional to help guide you on your wealth-building journey.
1Gallup.com, May 24, 2017 2Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
As savings held in cash will tend to lose value because inflation reduces their buying power over time, investing can help to protect the value of your money as the cost of living rises. Over the long term, investing can smooth out the effects of weekly market ups and downs.
As savings held in cash will tend to lose value because inflation reduces their buying power over time, investing can help to protect the value of your money as the cost of living rises. Over the long term, investing can smooth out the effects of weekly market ups and downs.
Start Early (and remember to rebalance) Taking advantage of the power of compounding is probably the most important rule when it comes to being a successful investor. ...
It's your tool for identifying businesses worth your time and money. In the upcoming sections, we'll explore the 'Four M's: Meaning, Moat, Management, and Margin of Safety. These concepts will help you distinguish wonderful businesses at attractive prices.
This sort of five percent rule is a yardstick to help investors with diversification and risk management. Using this strategy, no more than 1/20th of an investor's portfolio would be tied to any single security. This protects against material losses should that single company perform poorly or become insolvent.
Amount: Aim to save at least 15% of pre-tax income each year toward retirement. Account: Take advantage of 401(k)s, 403(b)s, HSAs, and IRAs for tax-deferred or tax-free growth potential. Asset mix: Investors with a longer investment horizon should have a significant, broadly diversified exposure to stocks.
Factors that have been identified by investors include: growth vs.value; market capitalization; credit rating; and stock price volatility - among several others. Smart beta is a common application of a factor investing strategy.
Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.
Consider saving 10% to 15% of your pre-tax income for retirement, but even if you only have a smaller amount to invest each month, it may still be worth it. Time in the market is key. Get started as soon as you can.
One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement.
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