LONG TERM BENEFITS OF A GOOD INVESTMENT
Forgone consumption’ is often used by economists to describe the money that we put aside in the form of savings for future purposes. Savings is basically a sensible start point of investment, where in the long run investment will help you achieve some significant goals and promise returns as well. One might often think of saving as investment, they might be somewhat similar in some aspects but they have their practical differences as well.
Investment is putting your saved money to work in the market in expectation of better returns in the long run. Investments can be in the form of liquid assets i.e. cash, shares, fixed interests and property which in relation to the risk of investment generate different levels of returns.
Shares and property are referred to as ‘growth assets’ which have the potential to earn a capital growth over the long term and an ongoing income return like dividends from shares and rent from property. Fixed income and cash are referred to as ‘Defensive assets’ which may not have generated the same levels of returns but they are less variable with smaller peaks and troughs.
Investments as we know are subject to market risks, over the years investors have earned rewards or profitable returns through their investment. Volatility can often offer investment managers better returns in the long run.
A good investment helps you stay ahead and significantly outperform inflation. Inflation is when the prices of general goods and services increase with the decrease in purchasing power of the buyers. For maximum and better returns on your investment they need to be higher than the rate of inflation after tax. Considering investments which can outperform inflation today is important since finding a savings account which has a interest rate higher than the inflation rate is next to impossible.
Investing your assets makes sure there is a regular flow of income even if they are subject to risks. This saves one from the uncertainty of a salaried job. Investing in equities, bonds and property is best to rely on as a regular source of income. Investing in a business builds up the potential of an unlimited source of income as the competition here is lesser than in a 9–5 job. Here one can work as much as his ambitions and energy permits allowing one to create a whole different industry for oneself.
What is a way to build your wealth than a profitable investment? Creating a proper step by step and labelled investment plan is what will lead you to build your money through investment.
Save on taxes with investment, the money you would put in a traditional IRA does not tax the year you earn it, rather you pay the taxes when you withdraw them during retirement. Frankly speaking there are quite a few loopholes in the tax system which helps you make more profits and pay lesser rates of taxes. Speak with your financial advisor today to come up with a custom plan on how to save on taxes.
Create a proper investment plan for yourself, you can either invest with lump sum amounts or you can invest small amounts on a regular basis. Instant investment of a lump sum amount allows your wealth to grow immediately even though they are subject to market risks. However, in a volatile market regular investment of smaller amounts will help iron out fluctuations of the stock market.
Your investment plans may change with your changing needs like for example, you may want to take lesser risks with your investments with age and depend on more stable investment patterns. For this one may build an investment portfolio with proper planning which will reflect your changing priorities. When approaching retirement one may not want to invest in risky sectors since they have lesser growth potential and may not bring in the expected amount of profits.
Good investment plans and greater returns through them guarantees job and career security than traditional salaried jobs. With the hire and fire policy in the corporate sector the career security has kind of disappeared. When running your own business through personal investment there is less to worry about when it comes to job security. Income levels might be low at times however will not reach a zero unlike in traditional jobs.
The best part about an investment is there are greater rewards for higher risks that are taken by the investor. When working for your own firm you will be the one receiving the profits for your work and not a third party. When working for oneself the rewards received are generally more in the long run than normal 9–5 jobs.
Lastly, with investments and profitable returns you can get an earlier shot at retirement. Investing from an early age helps you acquire quite an amount in the long run and if you are investing in your own business then the proceeds of the sale go directly to you.
