Reasons To Invest
Lesson 19 Module 6
There are many reasons you should invest, instead of keeping your hard-earned money in the bank.
The 3 main reasons are:
1. Beat Inflation
Inflation is the same as currency depreciation. Every year, the US dollar and other linked currencies, such as the UAE dirham, lose around 3% of their purchasing power due to currency depreciation, more commonly known as ‘Inflation’.
To put it in a way you will understand, if you have AED 100,000 in the bank, your money will only AED 97,000 worth of goods next year, because of inflation, and it will continue losing 3% of it's buying power each year it stays in the bank.
To beat inflation, and maintain the purchasing power of your hard-earned money, you need to invest, and earn more than 3% per annum on your investment.
2. Make Your Money Work For You
Beating inflation is good, but you can get your money working harder for you.
Imagine, if the income from your investments was equal to or more than your lifestyle expenses, would you need to work?
The Rule of 72
Divide 72 by the inflation rate or the growth rate, and you will get the number of years in which your expenses or money will double correspondingly.
The key to safe investing is to ‘Stay invested for the long term’, and ‘Not to put all your eggs in one basket’.
3. Profit From Other People’s Ideas (Legally)
Have you ever wished that you had thought about the business idea of Facebook, Amazon, Uber, etc…? or even thought of starting a business on your own?
If you did try to start a business, was it easy to raise capital, get sales, collect money or operate the business in general?
Why not profit from other people’s ideas, and Own The Brands? Investing is ‘Profiting from other people’s ideas’ - legally.
In the next chapter, we will look at the pros, and cons of each investment vehicle, and their structure.