Is Investing Worth It?

Even if you’re comfortable talking about earning, saving, and giving money, thinking about investing may seem a little (or a lot) intimidating. Seriously, some of us would rather hug a cactus than learning about the inversion of the yield curve. And, with all the jargon out there, it may be hard to figure out if investing is right for you. Let’s look at the simple facts about how investing works, as well as the pros and cons of investing, so you can decide whether it’s right for you, and what kind of investments you want to make.

What is investing and how can you get started?

Investing means taking your money and allocating it with the hope of making some sort of profit. You can invest in many things, including stocks, bonds, other securities, businesses, and real estate. When most people ask if investing is worth it, they mean stocks and bonds.

There are many ways to invest. You can invest in your employer’s retirement fund, usually either a 401(k) or IRA. You can also open a brokerage account and choose investments — like stocks, mutual, funds, or bonds — yourself.

Pros of investing

There are plenty of benefits to investing. Putting money into your retirement funds, for example, can help you retire comfortably when the time comes. With a 401(k) or IRA, you’re setting pre-tax money aside for the future. That money goes into investments that will hopefully grow with the market. If retirement is a financial goal for you, investing will likely play a part in that.

Despite what you might think, you don’t need a lot of money to start investing. While many mutual funds have minimum investments, usually $500 or above, you can invest in stocks, exchange-traded-funds (ETFs) and bonds with less.

One big benefit of investing is that your money can grow over time. While not guaranteed, the stock market has the potential for big returns over years or decades. Despite periodic dips or bear markets, long-term stock market growth can help you stay ahead of inflation.

Cons of investing

There are a few risks to be aware of before investing your money. Returns aren’t guaranteed, and sometimes the stock market goes down. It’s possible to lose some or even all of the money you invest, and you should avoid investing money you’ll need in the short term. It’s also important to diversify your investments, as it can help to smooth volatility in any single stock or sector of the market.

When you invest outside of your IRA or 401(k), figuring the taxes owed on different types of investments can be complicated. You may need to pay an expert to file your taxes if you’re not comfortable navigating intricate tax rules.

So, is investing worth it?

Investing offers a way to potentially grow your money and save for your financial goals. The downsides are, the market has ups and downs and returns can take a long time.

For most people, investing is necessary for a comfortable retirement. Even if you start your investing by just contributing to your employer-offered 401(k), you’re most likely to come out ahead if you invest for the long term.

All investments carry some level of risk including the potential loss of all money invested.