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We love lists. We want to know the 10
best pizza places in town and the 10
worst-dressed celebrities at the Oscars.
We long to find the top 10 movies of the
year and the 10 most popular songs of
the century. We want to know about the
richest people in the country and the
cheapest brunches in our city. In short,
the list of lists could go on for a long
time, but there's always room for one
more, so let's look at the Top Five
Reasons to Invest.
Here they are, in no
particular order of importance:
1. Investing can help you
enjoy a comfortable retirement.
Most people need at least 80 percent of
their pre-retirement income to maintain
a similar lifestyle during retirement.
You'll get some of your retirement
income from Social Security, but it
almost certainly won't be enough. To
help meet your retirement income needs,
you'll need to invest regularly, both
through your employer-sponsored plan,
such as a 401(k), and through an IRA and
other individual investments.
2. Investing can keep you
ahead of inflation.
Over time, even a low rate of inflation
can severely erode your purchasing
power. For example, suppose you
currently earn $50,000 per year, and you
assume a 4 percent inflation rate for
the next 30 years. At that point, you
would need to earn the equivalent of
more than $162,000 per year just to keep
the standard of living you have today.
If you want to stay ahead of inflation,
you will unquestionably need to invest.
And you'll need to keep in mind that,
when it comes to battling inflation, not
all investments are created equal.
Fixed-income vehicles, such as
Certificates of Deposit (CDs) and bonds
may be excellent choices for providing
you with stability of principal and
current income, but, over time, only
stocks have significantly outperformed
inflation. Consequently, you will need
at least some stock holdings in your
portfolio if you want to protect your
long-term purchasing power.
3. Investing can help you
prepare for emergencies.
If need a new car, or you face an
unexpected medical bill, where will you
get the money? By setting up an
emergency fund of six to 12 months'
worth of living expenses, and investing
the money in a liquid vehicle with
strong protection of principal, you can
help prepare yourself for life's bumps
in the road.
4. Investing can help you
realize your dreams.
If you want to someday travel the world,
own a vacation home or even open your
own business, you'll need sufficient
financial resources - and that means you
have to save and invest throughout your
working life. By following a disciplined
investment strategy and working with a
professional financial advisor, you may
be able to someday turn your hopes into
reality.
5. Investing can help you
leave a legacy.
You work hard all your life, but you're
not doing it all for yourself. If you
have a family, you want to be able to
leave something behind. You may also
want to support a favorite charitable
organization. To be able to leave a
financial legacy when you're gone,
you'll need to invest while you're here.
There you have five very
good reasons to be a lifetime investor.
The sooner you start, the better. |
