There is always an element of risk, but investing is good for several reasons:
- Possibility for better returns: Compared to merely saving money in a bank account, investing has the potential to produce larger returns. While investment returns are not guaranteed, traditionally the stock market has offered greater long-term returns than savings accounts.
- Investment can help you to beat inflation. Over time, inflation can reduce the purchasing power of your money, therefore investing in assets that can outperform inflation is a strategy to keep your money’s worth high.
- Diversification: Investing can help you diversify your portfolio, which means spreading your money across different assets such as stocks, bonds, and real estate. This can help reduce the risk of losing money if one investment performs poorly.
- Compound interest: Investing can help you take advantage of the power of compound interest. Over time, your investment gains can earn more gains, and your money can grow exponentially.
- Achieving financial goals: Investing can help you achieve long-term financial goals, such as saving for retirement, buying a house, or funding your children’s education.
Although investing prudently has proven over the years as a good financial planning strategy that one can adopt, there are still a large number of people who choose not to invest for various reasons:
- Lack of knowledge: Some people could choose not to invest because they don’t know how investing works or where to begin.
- Fear of risk: Taking risks when investing can make some people nervous about their financial future. They might like keeping their funds in low-risk investments like savings accounts.
- Lack of funds: Investing often requires a certain amount of money to start with, and some people may not have the necessary funds to invest. But do you know you start as little as RM 100?
- Procrastination: Some people may know that they should invest, but they keep putting it off for various reasons. But they always have time to spend their money elsewhere.
- Lack of trust: Some people may not trust the financial system or the investment industry, and therefore choose not to invest. Somehow some of this same people choose to put their money in questionable schemes.
- Prioritization: Some people may prioritize other financial goals such as paying off debt or saving for a big purchase over investing.