Why should I invest?


Q. I am a 38 year old unmarried man with a regular job and I have been saving for a number of years. I have built up a reasonable amount of cash and my best pal tells me that I should be investing. Why should I invest?

A. You should always aim to make any capital you have managed to save work for you. Investment in something whether stocks and shares, antique cars or any number of other options is always a good thing as investment will help your money to grow and investing in stocks and shares has the potential to give you the best long term returns. You will need to do some homework and a bit of reading to educate yourself but it can be well worth the effort.

There is however, a downside, which is that stocks can fall as well as rise and you should be aware of this but by looking at the overall picture in the long-term you should be able to make a reasonable profit.

By educating yourself you can learn how to pick the right stocks and reap a profit rather than buying those stocks that fall in value and lose you money.

There are other options like mutual funds, which can be as profitable as individual investment but somebody else makes the choices. They usually prove to be more stable than individual investments but this comes at a price. Nobody works for free and the higher your invest value the higher the fees you will have to pay.

If you are looking for low risk investment, bonds could be your answer. A good reason for investing in bonds is that although they normally only give a low to medium return the risk is considerably less. Government bonds are guaranteed but corporate bonds carry a higher risk element and you will need to keep your eye on the interest rate as if interest rates fall so will the value of your bond.

One quite simple way of investing is to buy your own home. The value of real estate generally rises in the long term and we all need somewhere to live.

Ultimately you cannot better the potential gains you can achieve by investing in stocks. By holding stock for more than one year when you do sell your stock you will be taxed at a capital gains rate of tax rather than your standard rate of tax. Depending on your income your regular rate of tax can be up to 35%. This can improve your profit considerably.


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