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You are Here : Home > Investor Education > The Stock Market

Investing in the stock market

Why and when should you invest?

Why should you invest?
Simply put, you should invest so that your money grows and shields you against rising inflation. The rate of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a period of time. Whether your money is invested in stocks, bonds or mutual funds, the end result is to create wealth for retirement, marriage, college fees, vacations or better standard of living. Also, it's exciting to review your investment returns and to see how they are accumulating at a faster rate than your salary.

When should you invest?
The sooner you start investing, the better. By investing into the market right away you allow your investments more time to grow, whereby the concept of compounding interest swells your income by accumulating your earnings and dividends. Considering the unpredictability of the markets, research and history indicates these three golden rules for all investors.
1. Invest early
2. Invest regularly
3. Invest for long term and not short term

While it's tempting to wait for the best time to invest, especially in a rising market, remember that the risk of waiting may be much greater than the potential rewards of participating. The earlier you start investing and continue to do so consistently the more money you will make. That's why stocks are the best long-term investment tool. The general upward momentum of the economy mitigates the stock market volatility and the risk of losses. That's the reasoning behind investing for long term rather than short term.

How much should you invest?
There is no standard amount that an investor needs to invest in order to generate adequate returns from his savings. The amount that you invest will eventually depend on factors such as:
1. Your risk profile
2. Your time horizon
3. Savings made

Remember that no amount is too small to make a beginning. Whatever amount of money you can spare to begin with is good enough. You can keep increasing the amount you invest over a period of time as you keep growing in confidence and understanding more of the investment options available. So, instead of just dreaming and waiting for the "right time", do something concrete about it and start investing as soon as you can with whatever amount of money you can spare.