This has been a question that has crossed our minds during our early twenties and thirties. Whilst the “You live only once” is a great motivator to splurge on shopping or to travel the world. Whilst all of this is good, there is always this question on our minds, that brings worry, fear, excitement, happiness, wonder, etc. and all sorts of emotions when it comes to knowing whether or not we have invested some amount of money for our future self. Whilst pondering over this thought, I came up with a few good reasons that compelled me to start investing. Let’s have a look at each one of these in isolation.
1. It pays significantly more than checkings/ savings account
Everyone has spare money that they keep aside. Whether it is known as a “rainy day fund” or an “emergency fund” that keeps lying in the bank account. People even save all of their money in the bank accounts, whilst they can invest the same money and earn a better rate of interest. Investing in financial instruments has been the most lucrative form of investment. Majorly because these instruments provide a high rate of return vs. savings bank accounts and are highly tradable. Also, if you plan to keep this money for a longer period of say 5 to 10 years, it could potentially have a big positive effect on your wealth.
2. It is a good way to realize your dreams
Whilst it’s great to have dreams of buying a big house, planning a big fat wedding or buying the new model of Tesla, it is equally important to set actionable plans in place so you can make these dreams come true. Having a dream is not enough, what is more important is to have a realistic plan that helps you achieve these dreams. For this, you could either invest a certain amount on a daily/weekly/fortnightly/monthly basis. It could be in stocks, mutual funds, ETFs, that help you save systematically and achieve you measurable returns at the same time. Personal finance is really about how you would like to live your life. It is all about figuring out what you really want, what you really value, and then put your money behind those goals and beliefs. And the upside to that is, you will eventually buy the house of your dreams/ buy that car/ have that wedding.
3. Getting the best of opportunity cost
Investing as you have known it, is basically making trade-offs. Whenever you make a decision to invest, you foreclose other options that give you instant gratification. A thing that gives you happiness usually robs you of long term wealth building. And when you let go of instant gratification, you take advantage of the opportunity cost. What might be a $100 investment every month for the next 10 years could be $9,270,906.88 (assuming 10% on an annual basis) , thanks to the power of compounding. $100 invested today may not be the same $100 in the next 10 years, if it’s invested it increases in value and if it’s not, then the value is much lesser (keeping in mind the inflation). These were a few reasons that compelled me to start investing, although I Yolo’ed most of my twenties, but as they say, it is never too late to start investing. Comment below and share with me about what compelled you to start saving/ investing.