Investing 101 – Why invest?

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” ~ Warren Buffett

We are constantly told to save for retirement and make your money work for you through investing. However, where should we start and why should we start?

Let’s start with what investing actually is – purchasing shares of stock (equity) and bonds (debt) of a company.

When you purchase a stock or a mutual fund (a bundle containing several different company’s stock), you are becoming a partial owner of a company. When you buy a share of Tesla stock, you are a partial owner of that company.

When you buy bonds or a bond fund, you are loaning a company money and receiving interest and payments from that company. This is the same principle as taking out a bank loan, but, in this situation, you are acting as the bank.

So why invest? Investing allows your to put your money to work for you. In a simple example

Einstein once said that compound interest is the eighth wonder of the world.

You already invest, though you might not realize it. Specifically, when you put money into a savings or checking account. You are lending your money to the bank in exchange for interest.

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