Purpose of Investing Money & Return on Investments are Important

By Grace

Of course, the purpose of investing money is not to lose money but to make more. Maybe to double it, triple it or make a yield of 1,000% after 10 years. I am investing my hard-earned money in stocks, mutual funds and trust accounts. I prefer stocks and mutual funds. There is old fact that if you want to become a successful investors, you must have education and training.

But what types of education and training should you have? In my own experiences, I didn’t attend seminars or investing workshops. I just read personal finance books entitled “Build Your Own Mutual Funds” and “The Wall Street Journal Lifetime Money Guide”.

If you are following this blog, a guide to investing for newbies, you may already know the importance of investing. You may recall that whenever you received your salary or income, you must pay yourself first. Did you follow the advice? What’s the difference between paying yourself first and paying yourself after you spend your money on your daily expenses. It has a big impact, paying yourself first means paying for your financial future.

But, now you are paying yourself first through saving and investing. Do you know what is the purpose of investing your money? Have you considered the BIG reasons why you are investing in the first place? Or you just invest because your friends and colleagues are investing their money. Well, you should have known the great reasons why you need to keep on saving and investing for your financial future.

There are different types of investments you should know. But you have to invest not just because you know the different purpose of each vehicle, but invest based on asset allocation. What do I mean by it. Asset allocation simply means distributing your total investment.

It can help you diversify your total assets. It means, you can recover from any loss in stocks (if there is a sudden market crash) when bonds and other money market funds are doing great. Asset allocation neutralize your losses.

Before we know the reasons, let us first define what is an “investment all about” According to WikiPedia;

Investment is time, energy, or matter spent in the hope of future benefits actualized within a specified date or time frame.

Simply means, if you fail to plan and study carefully how investing works, you may lose not just money, but you can also lose time and energy. Better to invest in education and training before you start putting your hard-earned money in “risks”.

purpose of investing

Image Credit: Seth Sawyer on CC 2.0 – Purpose

What is the Purpose of Investing Your Money?

I have my own reasons why I save money every month. I am quiet highly motivated when it comes to following the “pay yourself first” rule. Some of my investments can be done automatically wherein my preferred banks deduct some portions of my savings and invest them automatically in my trust accounts.

The point in investing money is to make it a “basis” to obtain financial freedom. I want to become happy and rich. I really want to retire young. I want to enjoy the life I truly deserved. That’s why I keep on investing money every month or when I make extra money. Here are the 2 of the best reasons why I am investing.

  • To achieve time and financial freedom
  • To retire young, happy and rich

Since I know already my purpose why I am saving and investing. I choose to put my money in stocks, mutual funds and trust account.

1. Stocks

Since I am still young, taking high risk types of investments is advisable. So that, my money can grow fast overtime. I prefer to invest in stocks using “cost averaging” wherein I can buy a lot of shares when the stock price of my favorite company are low and I can buy few shares when the stock prices are high. And the average of course, are great!

2. Mutual Funds

Why I invest in mutual funds? I invest in mutual funds because I want to leverage skills. By using other people’s time and talents I can make my money grow without any effort on my part. I don’t even to research market news and updates everyday. Why I did is I invest in a mutual fund equity (since I am young) and transfer my funds from equity type to balanced type when I will become 40 year old.

3. Invest in Bonds

You can invest in bonds using mutual fund companies or directly to government. Search the government if they allow you to buy government bonds without going to any brokerage firms. Bonds are good in neutralizing your total assets.

4. Purpose of 401k

The purpose of 401k plans is to help American employees to save automatically. These employees are eligible if their employer allows them to save for 401k plans. Most employees from public or private companies used 401k plans as their savings because it is easy and convenient.

5. Education and Training

I am not recommending to just read books or watch YouTube videos on how to invest. Example, if you want to invest in the stock market, you can just view tutorials on YouTube related to online stock trading? It doesn’t work that way.

You need to invest in education and training by attending seminars and workshops. You can also hire a Certified Financial Planner to guide and assist you before investing your finances.

Summing Up

  • Stocks are high risk that can allow you to maximize the growth of your investment funds.
  • Mutual funds companies allows you to transfer your investment funds from high risk or medium or to low risk types of investments.
  • Bonds neutralizes the financial losses.
  • 401k plans are good for employees who wishes to invest their money before they receive their monthly paycheck.
  • Invest in education, or else, you will become a dumb investor not a successful one.

Before I leave you the table, let me share some of the best Warren Buffet quotes on saving and investing, Warren Buffett is a well-known investor in the world. The third richest man in the world. He said,

On Savings: Do not save what is left after spending, but spend what is left after saving.

On Investing: Do not put all eggs in one basket.

Let me hear your thoughts about this guide. What about you? Did you find investing so difficult? Which of the investment vehicles mentioned above do you prefer? May I know the reasons why you are investing your money? Please use the comment box below. Thanks for spending your time reading this page! May you achieve financial freedom as soon as possible!

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