1 Investing allows us to grow out wealth over time by earning return on their initial capital
a.Potential for long-term returns
According to an Article release by the Columbia threadneedle investments,
While cash is undoubtedly safer than shares, it’s unlikely to grow much, or find opportunities to
grow, in the long run.
In the past, investors have found rewards over longer terms with investments that come with a
level of capital risk. That means the risk that you might lose some or all of the amount you
initially invested. Of course, these rewards are not guaranteed.
Volatility in the stock market, when stock prices change rapidly over a short period of time, isn’t
necessarily a bad thing. In fact, volatility can sometimes offer investment managers the
opportunity to buy attractive shares at a cheaper price and get better returns in the long term.
Source:https://www.columbiathreadneedle.co.uk/uk-capital-and-income-investment-trust-plc/
insights/benefits-of-investing/
B. Potential to Beat Inflation or Protection to inflation
According to the article release by BT Financial
Inflation is the ongoing rise in the cost of living over time, and it can impact on our financial
wellbeing.
One way to help outpace inflation – and generate positive ‘real’ returns over the longer term is by
investing in assets that are not just capable of delivering higher income returns but also offer the
potential for capital growth.
Source:https://www.bt.com.au/personal/investments/learn/before-you-get-started/the-benefit-of-
investing.html
C. The power of compounding
According to The article released by Wellsfargo
Compounding occurs when an investment generates earnings or dividends which are then
reinvested. These earnings or dividends then generate their own earnings. So, in other words,
compounding is when your investments generate earnings from previous earnings.
If you invest in a dividend-paying stock, for example, you might consider taking advantage of
the potential power of compounding by choosing to reinvest the dividends. To help increase the
potential benefits of compounding, start investing as soon as possible and automatically reinvest
your dividends and other distributions
Sourc:https://www.wellsfargo.com/goals-investing/why-invest/
2 .Investment contribute to financial security including, providing a safe funds on economic
Challenges
Investment Contributes to Financial Security:
Investing is a fundamental strategy for achieving financial security by utilizing available
resources to generate returns and build wealth over time. Whether through stocks, bonds, real
estate, or other financial instruments, investing offers the potential for significant growth and
income generation. According to Investopedia’s “Investing 101: A Tutorial for Beginner
Investors,” the act of investing is essential for individuals seeking to secure their financial
futures.
Source: https://www.investopedia.com/articles/basics/11/3-s-simple-investing.asp
Diversification as a Safety Net:
Diversification is a key principle in investment strategy that involves spreading investments
across different asset classes, industries, and geographic regions. This approach helps to reduce
the impact of any single investment’s performance on the overall portfolio. The Time Stamped's
article on “The Importance of Diversification in Investing” emphasizes how diversifying
investments can act as a safety net during economic challenges, as losses in one area may be
offset by gains in another. By diversifying, investors can minimize risk while maximizing
potential returns.
Source:https://time.com/personal-finance/article/importance-of-diversification/
Long-Term Perspective for Economic Challenges:
While economic challenges and market fluctuations are inevitable, adopting a long-term
investment perspective can help investors navigate through periods of volatility. Forbes’ piece on
“The Case For A Long-Term Investment Perspective” underscores the importance of maintaining
a focus on long-term goals rather than being swayed by short-term market movements. By
staying invested and allowing time for the power of compounding to work, investors can
overcome economic challenges and achieve their financial objectives. This approach encourages
patience and discipline, enabling individuals to ride out downturns and capitalize on eventual
market upswings.
Source: https://www.google.com/amp/s/www.forbes.com/sites/andybusser/2023/05/01/the-five-
tenets-of-successful-long-term-investing/amp/
