What Is Investing and Why Is It Important?

Investing, in the simplest sense of the word, is making your money work for you. Investing embodies loaning or contributing your money to something in order to receive profit in return. The whole goal of investing is to end up with more money than you started with. Money itself has a cost, and to borrow money from another (which is debt) will always have a value. Investing can also be speculative. Speculative investing is making money through buying something cheaper, or selling something higher, in value, than it is thought to be worth. Though slightly different, this still lends itself to the basic concept of investing; that one gives money to something, and thus receives even more in time.

Investing is like an automated assembly line. Once you set up the assembly line, you can sit back and watch it work for you. The same goes for investing. Once you make smart, well-educated investments, you can sit back and watch your money accumulate, and eventually start a “snowball effect”, in order to exponentially grow.

Investing is what truly separates the rich from the poor and middle classes. Whether someone is investing in the stock market, real estate, or even a savings account, it is bound to be fruitful and rewarding over time. Investing is a proven way in which most people attribute their financial success. If making as much money as possible is your goal, then investing is the means to bring about those ends.

Investing is all about preparing for the long term, and thinking about the future. While it takes sacrifice on the front end of an investment, the payoff in the end is tenfold. Investing money is something that cannot easily be achieved by someone with a short-sighted mindset, because it does not offer instant gratification, or the feeling of satisfaction for someone to get what they want, right away.

The main goal of investing is to allow your money to work for you. Here is a scenario to illustrate the benefits of investing. Let’s say there are two men that have $50 each: Allen and Bob. Allen decides he does not want to invest, and buys a $50 video game instead. Now Bob, being the intelligent fellow that he is, decides to invest $50 in a savings account, which doubles his money every five years. After five years, Bob has doubled the $50 to $100 in his savings account, while Allen only has the same video game. After 10 years, Bob’s money has doubled again, and he now has $200. In the meantime, Allen’s video game disc has become scratched and does not work. In the end, Allen has nothing of any value, while Bob has $200. This is a very dramatic example, but the principle of it illustrates how all investing works.

Reasons to invest span from the pursuit of financial security, the money to buy nice things, and not having to work a “nine-to-five” job. These pursuits are not farfetched; many people achieve them every day. The mere fact that someone can make money by having money sounds almost too good to be true. If one makes good choices and knows the pertinent information though, this dream is quite achievable.

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