Why Is Investing Important?


About 58% of adults invest in stocks. Are you ready to join that percentage? Are you feeling apprehensive about getting started?

Investing can seem intimidating at first. Why is investing important when you could just be putting your money in a bank and saving it for the future? When you're ready to invest, how do you even start? It all seems so out of reach when you weren't raised with this type of financial know-how.

We're here to help answer some of your questions. Read on to learn more so you can start investing with confidence and start reaching your financial goals.

Why Is Investing Important?

First, let's discuss the big question. Why is investing important, anyway? What's the point? Why invest when you could just save your money and not take the risk?

There are plenty of good reasons to become a beginner investor. Here are just a few of the ways that investing can help you and others.

Wealth Building

Investing allows people to grow their wealth over time, even if they don't have that much money to start with. You don't need an immense amount of wealth to get started. Anyone can make money by earning returns on their invested capital.

By putting money into assets such as stocks or mutual funds, investors have the opportunity to generate income and increase their net worth. Yes, it's easier to do this if you already have a good amount of money to start with, but any beginner investor with even a few dollars to spare can get started.

You may not become super wealthy through moderate investments, but you can secure your financial future.

Investing can help people by building a nest egg for retirement, funding education, or achieving other long-term financial goals, such as owning a home or a small business. By making smart investment decisions, individuals can create a reliable source of income. They can minimize the risk of financial instability.

Beating Inflation

Inflation keeps going up, and that means that your life is going to keep getting more expensive. Inflation erodes the purchasing power of money over time. Even if you're making more money at work, it may feel like your buying power is lower (because, in reality, it is).

Investing in assets that have the potential to outpace inflation, such as stocks or real estate, allows people to protect the value of their money. This can also allow them to maintain their standard of living over time.

This doesn't mean that you'll be able to live outside of your means once you start investing, but it should give you more wiggle room.

Achieving Goals

Investing provides a means to achieve various financial goals. Often, it gives people resources for those goals that wouldn't otherwise have had them. As we mentioned before, you don't need to start with immense wealth to build up a good investment.

Whether it's buying a home, starting a business, traveling the world, or leaving a decent sum of money for future generations, you can do it by investing. By allocating your money well, using the right investment strategies, and thus earning returns on investments, people can turn their dreams into reality.

Investing isn't magic and all investments carry risk, but they can change your life for the better.

Generating Passive Income

Passive income is income that you continue to earn even when you're not doing anything. While you're working, you're earning active income. After you invest money, the returns turn into passive income because that money comes back to you even when you aren't touching it. 

Certain investments, such as dividend-paying stocks, rental properties, or interest-bearing bonds, can generate passive income streams. Passive income allows people to supplement their primary sources of income. This lets them achieve greater financial freedom.

In some cases, passive income can cover certain bills. It can be enough to pay for a vacation or to upgrade someone's quality of life substantially. It can even be enough to cover someone between jobs or during emergencies if they've made smart investment choices.

Retirement Planning

Are you planning for your retirement? Some experts claim that you should have eight to ten times your annual salary available to you by the time you retire. Others claim that even that isn't enough.

For many people, with the ever-rising costs of living, the idea of having that much money set aside for retirement seems impossible. Investing can help. By learning to invest, you can set yourself up for retirement.

Investing allows people to save and grow their money over time. If they start early enough, this can allow them to fund their retirement years.

With life expectancies increasing and pension plans becoming less common (almost unheard of at this point), investing in retirement accounts such as 401ks and IRAs is essential for ensuring financial security during retirement.

Even just investing in standard stocks can be helpful when it comes to saving for retirement. You want to grow your money and make it work for you.

Innovation and Growth

Let's take this from another angle. Investing is important for individuals, yes, but it's also important for companies and for society as a whole. Why is that?

Why do we invest? It's not just a method to grow money. It serves a purpose.

Investing plays a crucial role in driving innovation, entrepreneurship, and even large-scale economic growth. Investing provides money to businesses, startups, and industries. Investors like you can fuel innovation, create job opportunities, and even help stimulate economic development.

Investing in emerging sectors and technologies also allows investors to participate in the growth of new markets and industries. Investors can fund new projects that they're passionate about.

Investing responsibly can have a positive impact on society and the environment. Through socially responsible investing, investors can support companies that align with their values. Many of these companies promote sustainable practices, social justice, and environmental initiatives.

As an investor, you can put your money toward industries that you'd like to see succeed. Sometimes this is riskier than choosing the big names, but it is more aligned with the "true purpose" of investing.

Learning to Invest: How to Start

So now that you know how important it is to invest, how do you get started? It's not as hard as it seems. You don't even need a lot of money to get started (though the more money you start with, the faster you can start earning).

Beginners don't have to jump in without any research. Here are a few quick tips that can help you out when you're learning new ways to invest.

Set Clear Goals

Define your investment goals fairly early on. Even if you don't have a specific goal, having a set amount of money you're aiming for can be helpful. Determine whether you're investing for retirement, saving for a major purchase like a home, building an emergency fund, or generating passive income.

Clear goals will guide your investment decisions. You're less likely to make impulsive choices if you know your end goal is waiting for you as long as you're willing to exercise patience.

Educate Yourself

Take the time to learn about basic investment concepts and ideas. You want to know the basics of things like stocks, bonds, mutual funds, ETFs, asset allocation, risk tolerance, and diversification.

There are many resources available, including books, online courses, and financial websites like ours, to help you increase your knowledge.

It used to be difficult to learn about specific stocks, but that's no longer the case. It's so easy to do your due diligence now.

Start Small

You don't need a large amount of money to start investing. It certainly helps, but you can start with pocket money.

Many brokerage firms and investment platforms offer low-cost options and allow you to start with small amounts of money. You can even invest a small amount of money every week (even as low as a few dollars).

This slow and steady approach is great because you may not notice that small amount leaving your account, but it grows more quickly than you'd think.

Seek Professional Advice if Necessary

Consider seeking guidance from a financial planner or investment advisor if you're unsure about how to start investing or if you need help developing an investment strategy.

A financial professional can help you make informed decisions based on your individual circumstances. They understand the ins and outs of the market, and they're ready to help you out.

As a beginner, they can be a great resource.

Are You Ready to Invest?

So why is investing important? If you're smart about it, it can change your life and give you financial freedom. It also gives you the power to fund businesses and initiatives that you care about.

Are you ready to start investing? FinTok can help. With user-friendly research tools, we can help you make your investment decisions with confidence. Both new and seasoned investors alike love our resources.

Investing can change your life. It's time to start growing your wealth. Get started with FinTok for free today.