Keeping money in your account
A lot of people know it would be a good idea to invest some of their money, but various factors result in them ultimately not doing this. For one thing, there is a certain amount of effort involved, especially when it comes to reading up thoroughly on the topic of investing. Secondly, it is becoming increasingly easy for investors to just stay in their “comfort zone”. The reality is, however, that an investor’s capital will decrease in value over time as inflation rises if it is retained solely in the form of money.
Then there is the compound interest effect. This is even larger for income from securities seeing as these tend to have higher returns than the interest on a bank account. A consistent return on your capital will lead to exponential growth in your assets in the longer term. Here’s a quick example to illustrate this fact: if an investment (after deducting investment costs) yields a return of 3% each year, the value of the investment will double within about 24 years. This increase in value will mostly occur during the last five years as the capital that yields your return will have already grown substantially. The sooner you invest, the bigger your profits in the long return if you achieve a positive return.
Of course, you can never guarantee this sort of consistent return. Still, the past shows us that diversified, long-term investments do pay off. If you keep all your money in your savings account, you will be unable to benefit in this way.