In the world of finance, investing is the purchase of securities, real estate, and other items of value for the purpose of obtaining capital gains or income
In the simplest sense, investing is buying an asset at a low price and selling it at a higher price. When an investment increases in value between the time you buy it and the time you sell it, it is called a capital gain. For example:
A stock may appreciate when a company creates a new, popular product that drives sales, increases the company’s revenue, and increases the stock’s value in the market.
A corporate bond may appreciate in value when it pays 5% annual interest and the same company issues new bonds that pay only 4% interest, making yours more desirable.
A commodity like gold can appreciate because the US dollar loses value, which increases demand for gold.
The value of a property may increase because you have renovated it or because the neighborhood has become more attractive.
In addition to the benefits from capital gains and appreciation, investing is also when you buy and hold assets that generate income. Instead of making capital gains by selling an asset, the goal of investing may be to earn income by buying assets that generate cash flows over time and holding them without selling them. This is the case with investing in rental property, for example.
Why invest your money?
Investing your money is a wise and judicious decision. It is an effective way to grow your savings, protect yourself against inflation, and calmly prepare for your financial future. Whether you are a beginner or an experienced investor, understanding the multiple benefits of investing is essential. Here are seven key reasons that illustrate why investing your money can be a winning strategy for achieving your financial and personal goals:
Investing gives you more control over life : No one knows what will happen in life and it is impossible to prepare for every eventuality. However, having precautionary savings and investments that generate appreciation or income gives you greater flexibility and choice, especially when life throws you a curveball, as it does from time to time. It will also help reduce your anxiety related to financial stress.
Discipline : Many people spend their money and immediately enjoy it. But many successful investors believe in saving first, because getting into the habit of saving or investing regularly, no matter how much you can afford, can help instill financial discipline and help you achieve your goals.
Protect your savings against inflation : Investing helps protect your savings against the erosion of value due to inflation. Indeed, simply keeping your money in a traditional savings account may not be enough to maintain its purchasing power over time.
Time can work in your favor: Time is a powerful and important aspect of investing. The longer you stay invested, the better, as you have more time to recoup losses incurred during market declines.
The Power of Compound Interest : One of the reasons time is such a powerful ally is because of something called compound interest. In other words, your money makes money through interest, capital growth, or dividends. This means that your base amount grows, which in turn generates more money, and so on. The effect is often compared to a snowball effect, and the longer your money benefits from the power of compounding, the more opportunities you have to grow your investment.
It is easy to invest : Finally, it is not very complicated to invest. For those who wish to do it alone, a Boursorama or a Fortuneo will do the trick very well. Otherwise, our Neofa advisors and experts are at your disposal to guide and support you.
You can start small : You don’t need a lot of money to start investing; in fact, it makes sense to start small. This allows you to start earlier, rather than waiting until you have saved up a large sum, which can take years. It also means you can get a feel for investing without taking on large amounts of risk.
