Introduction to Investing

What is investing?

Investing means using your money to buy assets that have the potential to grow in value over time or provide income. These assets could be stocks, bonds, mutual funds, real estate, or even a business. While saving is crucial for short-term goals and emergencies, investing can help you build wealth over the long term and achieve bigger financial dreams.

Why should you consider investing?

• Beat Inflation: Over time, the cost of goods and services tends to rise (inflation). Investing can help your money grow faster than inflation, preserving its purchasing power.
• Compound Growth: Just like compound interest in savings accounts, investments can benefit from compounding returns over time. This means you earn returns not just on your original investment, but also on the returns you've already earned.
• Achieve Long-Term Goals: Investing can help you reach significant financial milestones like paying for college or buying a house.

What are some key investment concepts to understand?

• Risk and Return: Generally, investments with higher potential returns come with higher risk. It's important to find a balance that you're comfortable with.
• Diversification: This means spreading your investments across different types of assets to manage risk. The idea is that if one investment performs poorly, others might perform well, helping to balance out your overall returns.
• Time Horizon: This refers to how long you plan to hold your investments before you need the money. Generally, the longer your time horizon, the more risk you might be able to take on.

Remember, investing involves risk, including the possible loss of principal. It's important to understand these risks before you start investing.