Why Start Investing- Moneyworks from Investors Business Daily (2024)

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How to Start Investing

If you’ve got money, you can make it work for you. Here’s the best part: you don’t need a lot to start, and getting an early start can make a massive difference.

Investing can give you financial freedom.

Investing can have a big positive impact on your quality of life.

When you invest, you buy things like stocks, bonds and real estate with the expectation that when you sell them, you’ll have more money.

Investing is a way to put your money to work for you, even while you’re off doing something else.

Invest early and reap the rewards.

The key to building financial strength through investing is to start as early as possible and stick with it. Another important factor is choosing investments that fit your needs.

Think about your big picture goals: Maybe you want to start your own business, travel the world or retire early. Investing early can help you achieve those goals!

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Financial independence means living your best life.

Investing can bring many benefits. First, it can help ensure that you don’t run out of money, particularly in your retirement years after you stop receiving income from your job.

Many studies conclude that Social Security retirement benefits won’t be enough to maintain a person’s standard of living in retirement. A separate retirement account can make up most—if not all—of any shortfall.

Investing can help you amass enough wealth to enable you to live off the money in your accounts. Think of it. No more job, unless you want it. No more wondering if you’ll have enough money to pay your bills at the end of the month.

The Elements of Investing

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The miracle of compounding interest

The beauty of investing is that even a small account can grow to a large pile of cash in time to make a big difference in how you live your life.

That’s because of the miracle of compounding interest. It’s simple but powerful: With 10% interest, $100 grows to $110 the first year. In the second year, assuming you don’t take money from your account and you continue to earn 10% interest, that $110 grows to $121.

Each year you earn interest on the new, usually higher balance. Since most years the stock market goes up, that means you’ll be earning interest on a higher balance. In the table below you can see that if you start with $100, after 10 years earning an average annual 10%, your account will grow to $259—more than doubling. Start with $10,000 and you’d end with $25,937.

How much would you have if you start investing early?

Look at what would have happened if you had invested $10,000 in the S&P 500 stock market index five, 10 or 20 years ago.

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When you’ve got time on your side, you don’t need to start with a lot.

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Inflation means your money is losing value when not invested.

  • Inflation is a general rise in prices and a drop in the purchasing power of money.

  • For example, say the $100 you have in your bank account today can buy 20 cups of coffee. But next year $100 might be able to buy only 19 cups of coffee. That’s the effect inflation has on the prices of things you buy. The purchasing power of your money has dropped.

  • Inflation is common, with rates varying over time. But a lifetime of even a little inflation can take big chunks of value out of your money.

Want to beat inflation?

  • In the past 10 years, the S&P 500 stock index, which represents big, high-quality companies, rose at an average annual rate of 13.88%. At that rate, an investment of $10,000 would have grown to $36,683.82. But adjusted for inflation, the purchasing power would be just $30,947.74.

  • Inflation is an even bigger drag on investments that earn a lower rate of return. Like most types of bonds over the long haul, long-term government bonds produced lower returns than stocks in the past 10 years. They grew at an average annual rate of 7.16% -- nearly half the rate of stocks. A $10,000 investment would have grown to $19,967.65. Inflation would have cut the purchasing power to just $16,936.28.

  • The best way to offset the effects of inflation is to invest in assets that have a higher return than inflation.

Learn more about the inflation rate and its impact on the U.S. economy.

Saving vs. Investing

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Saving

Savings go into bank accounts, CDs and money markets where you don’t earn a lot but there’s little chance the value of your account will fluctuate much.

Savings are for rainy days, emergency spending and money you’ll need in the next one to five years.

You need to count on it being there in the near future.

Learn more about savings accounts in the personal finance lesson pages.

Investing

Investments should be made with money you don’t plan to spend for five or more years.

Ideally, that money should go into the stock market and other areas where you can earn a higher rate of return.

While the stock market has historically fluctuated more than savings in the near-term, it has provided significantly higher returns than savings in the long run.

Don't invest too little

A common money mistake is keeping too much money in savings and not enough in investments.

By doing so, you miss the opportunity of having your money work much harder for you over a long period of time.

Let’s compare what would have happened if you put $10,000 in an average savings account or the stock market over the past 10 years.

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What $10000 invested for 10 years in an average savings account and the S&P 500 stock index would have grown as of 12/31/2020

Learn more about savings accounts

Key Points

1

The earlier you start investing, the faster you can grow your money and make it work for you.

2

Inflation means your money is losing value when it’s not invested.

3

Saving and investing are different. It’s important to do both, for money you may need in the near future (savings) and in the long term (investing).

Read more on How to start Investing

  • Why Start Investing
  • Types of Investments
  • What is the Stock Market?
  • How to Trade Stocks
  • What Makes a Great Stock
  • How to Read a Stock Chart
  • Stock Market Myth vs Facts
  • How to Get Started

More on Intro to Investing

Why Start Investing Now

If you’ve got money, you can make it work for you. Here’s the best part: you don’t need a lot to start, and getting an early start can make a massive difference.

Types of Investments

Where can you stash your money, aside from a shoebox under the mattress? These are the most common ways to invest and grow your funds.

What is the Stock Market?

Bulls, bears and big banks: It’s all part of the rich stew that is the stock market. Here’s an intro to how it works and the lingo to know.

How to Trade Stocks

Buy, sell or hold? Trading stocks is how you make money in the market, and we’ll show you how it’s done.

What Makes a Great Stock?

There’s an old saying: All stocks are bad unless they go up. We hit the books and found 5 things that the biggest stock market winners have in common.

How to Read a Stock Chart

Got 10 minutes? Then you can learn to read stock charts and give yourself a massive edge when you’re investing.

Stock Market: Myths vs. Facts

The stock market has more myths than ancient Greece. We’ll use research and facts to debunk the 6 most common ones.

How to Get Started

Now that you’ve learned about the stock market and trading, interested in trying it out? Here’s your guide to jumping in.

© Investor's Business Daily LLC. All rights reserved. |About Us|Terms of Use|Privacy Policy (UPDATED)|Do Not Sell My Personal Information

Why Start Investing- Moneyworks from Investors Business Daily (2024)

FAQs

Why would investors want to invest in my business? ›

Investors do not want a company that will be stagnant. They want to invest in startups that will thrive and eventually provide a return on their investment. Your business should be built with scalability in mind. Building a company that does not scale is one of the most common mistakes startups can make.

How much is the subscription to investors business Daily? ›

Our members get access to high-performance stock picks, comprehensive ratings and valuable benefits that help you become a better investor. No obligation. Try 2 months for $20, then only $34.95/month thereafter.

How does investor business daily work? ›

We help individual investors like you outperform the market with our pro-quality research, tools and analysis. Our team of market experts leverages years of experience and a time-tested investing system to identify winning stocks and determine the optimal times to buy and sell. We do the research, you make the trades.

Why should you start investing today? ›

The earlier you start investing, the faster you can grow your money and make it work for you. Inflation means your money is losing value when it's not invested. Saving and investing are different. It's important to do both, for money you may need in the near future (savings) and in the long term (investing).

Why do you need to start investing? ›

Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.

Why is it important to begin investing early? ›

Because investments grow at an exponential rate, meaning it builds onto itself, investing earlier will leave you with a significant larger retirement sum than if you had chosen to wait. There are many ways to invest your money and make it work for you.

What is the main purpose of investment in business? ›

Investment definition is an asset acquired or invested in to build wealth and save money from the hard earned income or appreciation. Investment meaning is primarily to obtain an additional source of income or gain profit from the investment over a specific period of time.

How do investors benefit a business? ›

Investors play a crucial role in providing the much-needed financial support to bring your startup ideas to life. But beyond just money, they can also provide valuable insights, mentorship, and connections that can help your business grow and succeed.

How often does investors business Daily come out? ›

A Weekly Print Edition

You also get the IBD Weekly Print Edition delivered every week!

Is IBD Live worth it? ›

“I have learned more about the logistics of trading on IBD Live in the last 3 weeks than I have in the last 20 years.” “IBD Live is extremely valuable for both beginners and long-term investors.”

Is investors business Daily app free? ›

The IBD app is free to download but IBD Digital subscribers get access to premium ratings and interactive tools.

Who owns investors business Daily? ›

Founded in 1984 by William O'Neil as a print news publication, it is owned by News Corp and is headquartered in Los Angeles, California.

What is the mission statement of investors business Daily? ›

Our mission is simple: To help our customers make more money in the stock market.

How do investors make money? ›

Some pay income in the form of interest or dividends, while others offer the potential for capital appreciation. Still, others offer tax advantages in addition to current income or capital gains. All of these factors together comprise the total return of an investment. Internal Revenue Service.

What is the smartest thing to invest in right now? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
May 22, 2024

What is the best investment to make money? ›

Overview: Best investments in 2024
  1. High-yield savings accounts. Overview: A high-yield online savings account pays you interest on your cash balance. ...
  2. Long-term certificates of deposit. ...
  3. Long-term corporate bond funds. ...
  4. Dividend stock funds. ...
  5. Value stock funds. ...
  6. Small-cap stock funds. ...
  7. REIT index funds.

How to start investing for beginners? ›

Let's break it all down—no nonsense.
  1. Step 1: Figure out what you're investing for. ...
  2. Step 2: Choose an account type. ...
  3. Step 3: Open the account and put money in it. ...
  4. Step 4: Pick investments. ...
  5. Step 5: Buy the investments. ...
  6. Step 6: Relax (but also keep tabs on your investments)

What are the 3 things you need to start investing? ›

To get started investing, pick a strategy based on the amount you'll invest, the timelines for your investment goals and the amount of risk that makes sense for you.

What are the main reasons to invest? ›

Why Consider Investing?
  • Make Money on Your Money. You might not have a hundred million dollars to invest, but that doesn't mean your money can't share in the same opportunities available to others. ...
  • Achieve Self-Determination and Independence. ...
  • Leave a Legacy to Your Heirs. ...
  • Support Causes Important to You.

At what point should you start investing? ›

When it comes to retirement, the recommendation is to start as early as possible, even if it's with small amounts, and aim to save around 10% to 15% of your income. For non-retirement investments, ensure you're in a stable financial position and ready to handle the inherent risks of investing.

Why is investment important in life? ›

Brings financial Independence

You can get financial freedom in your old age by investing regularly to create a retirement Corpus. The passive income you will earn from this corpus will enable you to take care of your monthly expenses and other needs comfortably after retirement.

Why did I start investing? ›

You are not going to earn all your life and the period of working life is limited, so you must save regularly and invest to provide enough for your retirement or non-working life. Saving and investing is important so as to take care during emergencies and achieve your goals in life.

What is one benefit of investing over time? ›

One of the main benefits of a long-term investment approach is money. Keeping your stocks in your portfolio longer is more cost-effective than regular buying and selling because the longer you hold your investments, the fewer fees you have to pay.

How do I convince an investor to invest in my business? ›

Convince investors to invest in your startup
  1. Define your startup and its purpose.
  2. Do your research.
  3. Create a pitch deck.
  4. Find the right investors.
  5. Build relationships with investors.
  6. Make your case.
  7. Overcome objections.
  8. Close the deal.
Apr 16, 2024

Why should investors invest in you? ›

Investors want to see that your business is already seeing some success. This is why its important to demonstrate traction, whether its through revenue growth, customer acquisition, or some other metric. Showing that your business is already seeing some success will help convince investors that its worth investing in.

What does it mean when someone wants to invest in your business? ›

Money is vital in business, but, ultimately, what matters is equity, or your stake of ownership in the company. When an investor chooses to fund your business, they're buying equity of their own. This gives them influence over how things are done. For many small business owners, retaining control is a top priority.

Why should you invest in your own business? ›

Being a business owner typically means reaping the highest reward when it comes to the business' profits. The reason is that business owners have something the traditional employee doesn't—equity. Equity is the value of a business, taking into account items such as stock price, company assets, and product inventory.

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