What – no one ever told you. Why should you invest? Because if you do not invest in anything, the only asset the you will have is cash money. Cash money happens to be a liability. It’s an IOU. A promissory note. Besides the fact that cash is a liability and the accounting laws let us list it under the asset column, cash money has an ever declining value. Do you know why this is? Probable not. It’s because the central bank – the federal reserve, is always printing off more and more money without respect to the demand of the goods and services that are being created. As more and more money is being added to the money supply, the value of that dollar is shrinking. Let me give you an example. Back in 1955 the value (cost) of a first class postage stamp was 3 cents. The value of a first class postage stamp today is 42 cents. What changed? Obviously not the stamp, it has always been a first class stamp. The change was in the money supply. More money being created = smaller value for every dollar. This is why prices will always continue to rise and rise and rise. Because it will always take more money to trade for whatever it is that you need or want. Are you starting to see the relationship between the value of a dollar and prices? Good.
This is why it is a good idea to trade money for true assets – things that put money into your pocket. A good investment can put an awful lot of money into your pocket. At this point it would be a wise decision to put that money back into another investment vehicle. The longer that you hold onto your cash money – the less valuable it becomes.
If you are wise, you will research and study about investing. The more educated that you can become regarding this issue, the less likely you are to lose money in the markets. In fact, if you thought that the markets are risky, then you are a risky investor. You see the markets are not risky at all, they simply are what they are – a place for buyers and sellers to come together to exchange goods and services. Risk is a function that is dependent upon the investor. It is inversely related to the financial literacy of the investor in question. This means that as your financial literacy increases – your risk decreases. As your risk decreases, your opportunities in the markets become predictable. The money flows from the risky to the non-risky investors.
Financial literacy is the knowledge and understanding of financial statements(income statement and balance sheet), cashflow, and the difference between an asset and a liability. With this information you are already far ahead of the other players. I hope at this point you understand the value of investing.