Why invest?

In this world there are two ways to earn our income - one is to exchange labour for a salary and the other is to have our money earn more money for us.

We will eventually reach the age of retirement one day when we can no longer be part of the economically active group. How do we go on with life thinking that we are still financially independent? Will our savings in the bank be able to see us through?

Sometimes we think that money kept in a savings account and earning interest every year is investment, however, interest rates may not even keep pace with inflation. In order to beat inflation, we need to put our money in investments that earn a substantial amount of returns.

There is always risk in anything we do, investing in financial products, acquiring real estate properties, or even starting our own business establishments. Thus, we need to conduct market studies and research in order to understand the risks we are undertaking. Understanding the risks is the first step toward minimizing them.

Diversification is a commonly adopted strategy by most investors. We can do this by having investments in a range of products like stocks, investments in bonds mutual funds etc. An advantage of this is that we are able to spread our investments over a wide range of products without having to do a lot of research on different companies. This gives you diversification, and also has a professional taking care of the research end of that part of your investment portfolio.