Why Should You Invest? Here Are Five Good Reasons



We love lists.

We want to know the places for the best hamburgers in town and the worst-dressed celebrities at the Oscars.

We long to find the top movies of the year and the most popular songs of the century. We want to know about the richest people in the country and the best places to fish.

In short, the list of lists could go on for a long time, but there's always room for one more. In no particular order, here are:

The Top Five Reasons to Invest

1. Investing can help you enjoy a comfortable retirement.

Most people need at least 80 percent of their pre-retirement income to maintain a similar lifestyle during retirement.

You'll get some of your retirement income from Social Security, but it almost certainly won't be enough.

To help meet your retirement income needs, you'll need to invest regularly, through both your employer-sponsored plan, such as a 401(k), and an IRA and other individual investments.

2. Investing can keep you ahead of inflation.

Over time, even a low rate of inflation can severely erode your purchasing power.

For example, suppose you currently earn $50,000 per year, and you assume a 4.0 percent inflation rate for the next 30 years.

At that point, you would need to earn the equivalent of more than $162,000 per year just to keep the standard of living you have today.

If you want to stay ahead of inflation, you will unquestionably need to invest. And you'll need to keep in mind that, when it comes to battling inflation, not all investments are created equal.

Fixed-income vehicles, such as certificates of deposit (CDs) and bonds, may be excellent choices for providing you with stability of principal and current income.

Over time, only stocks have significantly outperformed inflation. Consequently, you will need at least some stock holdings in your portfolio if you want to protect your long-term purchasing power.

3. Investing can help you prepare for emergencies.

If you need a new car or face an unexpectedly large medical bill, where will you get the money?

By setting up an emergency fund of six to 12 months' worth of living expenses, and investing the money in a liquid vehicle with strong protection of principal, you can help prepare yourself for life's bumps in the road.

4. Investing can help you realize your dreams.

If you want to someday travel the world, own a vacation home or even open your own business, you'll need sufficient financial resources -- and that means you have to save and invest throughout your working life.

By following a disciplined investment strategy and working with a professional financial adviser, you may be able to someday turn your hopes into reality.

5. Investing can help you leave a legacy.

You work hard all your life -- but you're not doing it all for yourself.

If you have a family, you want to be able to leave something behind. You may also want to support a favorite charitable organization. To be able to leave a financial legacy when you're gone, you'll need to invest -- while you're here.

So there you have them -- five very good reasons to become a lifetime investor.

-- Ross Hage is a licensed financial adviser with the firm of Edward Jones. For more information, call him at (928) 468-2281.

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