What is Investing?

let’s try to understand what is an investment or investing is about..

Investing means engaging your money with the expectation of earning income or profit. An investment is a process of purchasing an asset or a plan that increases its value over time and provides returns in the form of income, value growth or capital gains.

Investing is an opportunity for people to increase their wealth and financial assets. This extra income helps people to lead a better and safer financial life. A person having good knowledge about investing and keep learning about money, can enjoy more profits and benefits.

Why is investing important?

Some people think that if they have a good job and a stable life, what is the use of investing? here are some reasons to think seriously about – why investing is important:

• For good retirement life:

Think about how you will live after retirement and why it is important to plan for it. Use your savings and start investing in different options like mutual funds, stock market, FD’s and real estate. So that you can live your life during retirement with help of this profit / passive income. Basically, investing helps you live your retirement life comfortably.

• To protect yourself financially from any unforeseen event:

Life is uncertain … emergencies come when we least expect it. If you are investing and saving money in your emergency fund for any such uncertainties/emergencies like losing your job, disability etc. then it can help you to protect yourself financially in any such situation.

Take the example of the present pandemic. Many of you know that people lost/losing their jobs, salaries of some people have been reduced due to the current pandemic. In such an unfortunate situation, your investment can help you survive and buy essentials like food, gas, electricity, etc.,for a while, until the situation improves.

• Money cannot be disguised:

Everything can be disguised but not money. When you have a financial problem, you can’t say or do much about it. After a point financial aid is not useful or there are limited ways to get financial help. Instead, why not be prepared yourself financially? It is always better to be financially self-sufficient than to reach out to others for money.

• To increase your wealth and financial assets:

One of the main reasons why one should invest is to- increase one’s wealth and financial assets. And who doesn’t love extra money or little profit?

• To achieve various financial objectives:

Investing can help you achieve different financial goals. If your money earns a higher rate of return in investments than a savings account, you will earn more. One can use this invested money to buy a house, buy a car, start your own business or educate your children etc.

• To gain financial freedom:

You can’t have financial freedom without investing. Saving money in a bank alone does not give you financial freedom, but investing gives you real freedom. Because investing offers passive income or returns that helps you achieve financial dependence.

• Investing helps build confidence:

If you are investing and can see positive returns, it helps to boost your confidence that you are not dependent on anyone for money. You can take care of yourself now and in the future.

• Tax deductions/benefits:

Investing helps in reducing your taxable income. You can invest your savings in various investment avenues which provide tax benefits.

Note:- Above article based on one of my Quora Answer.