It's extremely important to invest your money, if possible. If you haven't started yet, you should start as soon as soon as you can, because the earlier you start, the more you can make. Some things, like rent and food, take priority over investing, but it should still be high on your list of financial priorities.
The stock market rises on average by 10% a year, which means that over 10 years, $10,000 will become $25,900. If you kept your money in a savings account that accrues 1% in interest, you would only have $11,000 over the same time span. Investing can make a huge difference on how your money grows and can set you up for a comfortable future.
Make your money work for you
Getting a return on your money that your're not saving, is a lot better than having it sit and do nothing. In fact, if you have it sitting in a bank, you're actually losing money due to inflation. As prices rise each year, you can buy less with the money in your account. This means that if you invest and get a return greater than inflation, you're making money. However, If you aren't saving, it's more important to do that first and establish an emergency fund.
Barriers to invest your money are low
These days, it's cheaper than ever to start investing. Many platforms have gotten rid of expensive commission fees and will even manage your entire portfolio while only collecting a small fee. Creating an account on a platform like Fidelity and investing in ETFs is one of the easiest ways to get started. If you invest in a fund, like an ETF, your money is diversified for you, so you have a lot less risk.
However, you can always use one of these platforms to invest in a company you personally believe in. While it's not recommended, unless you've done some research, you can buy stock in a single company. This comes with a lot more risk, because if that company fails, you lose all of your money.
The risks when you invest your money
Investing money does not come risk free. In fact, that's why the returns are better than sitting in the bank, because there is risk. Typically, the higher the risk of an investment, the higher the return. At any moment, a recession can hit and the stock market can drop, making you lose all of your returns. However, if you keep your money in the stock market, it should rebound and you'll gain even more than you had before.
If you are a more risk averse person, you can add more diversity to your account and hold more bonds. They typically offer a much lower return, but also have a lot less risk associated with them. It's normally a good idea to hold more and more bonds as you get closer to retirement (or the end of your investing horizon).
Investing is an important thing to start doing, but sometimes other expenses get in the way. Debt can be a huge burden for a lot of people and prevent them from saving, especially student debt. If student debt is an issue, Defynance can refinance student loans through an income share agreement. An income share agreement makes sure your payments are always affordable, so you have money for the other things in life.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
