Why should you Invest?

Why You Should Invest

Investing has become increasingly important to many people, as the future of social security benefits becomes unknown; in some countries social security is actually non-existent.

Everyone wishes to ensure a secure future, and they know that if they are depending on Social Security benefits, and pension or retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.

Many people try to save money in a low interest savings account over the years. You may have sold an inherited property for good money or realized some other type of windfall, and you need a way to make that money grow. Investing is the answer to make your money grow faster.

Investing is also a way of attaining the things that you want, such as a new home,a new car, college education for your children, or expensive holidays abroad. They type of financial goal you have will determine what type of investing you do.

If you want or need to make a lot of money fast, you would be more interested in Short term investments which carry higher risks, which will give you a larger return in a shorter amount of time. If you are saving for something in the far off future, such as retirement, a college education for your new born baby, you would want to make a longer term investment which is safer and grows over a longer period of time.

The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income… you will eventually want to retire.

You cannot count on the social security system to do what you expect it to do. You also cannot depend wholly on your company’s retirement plan either. So, investing is the key to insuring your own financial future, but you must make smart investments!

Long term Investment

Long-Term Investment

Treasury Bills

This comes in-block and is used by government to help the public and to

prevent too much money in circulation. The minimum depends on the government but

is mostly in multiples of 10,000.

Bonds: Bonds come in various forms.

They're known as "fixed-income" securities because the amount of income

the bond generates each year is "fixed," or set, when the bond is sold.

From an investor's point of view, bonds are very similar to Certificate of Deposits, except

that they are issued by the government or by corporations instead of

banks.

Stock: Stocks are a way for individuals to own parts of businesses. A

share or stock represents a proportional share of ownership in a

company. As the value of the company changes, the value of the share in

that company rises and falls.

They can be Ordinary Shares or Preference Shares. Debenture loan stocks

are also available in some companies.

Choosing long term investment means an Investor is comfortable enough to overlook

fluctuations to his investment i.e after a series of short term investments, resources

are now pooled together to obtain a longer term investment portfolio.

This investment option means that you cannot pull out your investment capital on

impulse (at least not as easily as going to the bank to withdraw your savings)!.

An Investor in the long term must be more versatile. Monitor your investment by watching

stock indices, obtaining an analysis of the various companies you have invested in.

Short Term Investments

Types of Investment

Short-Term Investment

Savings account:

This is the easiest and often the first banking product accessible to everybody. It doesn’t

require any huge deposit to open. Savings accounts earn a small amount in interest (anywhere

from 2.0% to 4.0%, often less), making them a little better than a piggy bank. The attractiveness

of this type of Investment is that it is within the Investors control. You determine how much to

put in your account and when to withdraw your money. There is usually no limit to your activity

in the account. Although in some financial institutions, interest will be withheld if withdrawal

from the account is too often within a stipulated period of time.

Money market funds(Fund Placement): Money market funds are a specialized

type of mutual fund that invests in extremely short-term bonds. Unlike most mutual

funds, shares in a money market fund are designed to be worth fixed amount of money
at all times. Money market funds usually pay better interest rates than a

conventional savings account. The rates of interest are sometimes negotiable and large
amount of money is involved.

Certificate of deposit (CD)(Fixed Deposit): This is a specialized deposit you

make at a bank or other financial institution. The interest rate on CDs is usually

about the same as that of short- or intermediate-term bonds, depending

on the duration of the CD. Interest is paid at regular intervals until

the CD matures, at which point you get the money you originally

deposited plus the accumulated interest payments. CDs offered by banks

are usually insured.

Making a choice of a short term investment depends on your income level. For a low

income level family, your investment can start with short term investments. The

advantages of starting with a short term investment include:

1. Ability to access funds as and when needed for immediate family needs

2. Ability to save or investment only what you can afford with impinging on the family's
standard of living

3. Opportunity to invest at your own level. Investment is very important!

Even if you start small!!

4. Making short term investment over a period of time ensures that you can have the

opportunity to make a long term or bigger volume of investment at a later period.