There are lots of different reasons why people invest. It can be personal, and is often tied to your wider life and financial situation. Let’s dive a little deeper into some of these reasons.
When we surveyed a group of Sharesies investors about why they started investing, 55% said ‘to get a higher rate of return than my savings’ and 37% said ‘to feel more financially secure’. Other responses included ‘for retirement’ (25%), ‘for my child or family’s future’ (21%), and ‘for a specific goal (like a house or holiday)’ (7%).
Grow your wealth
The main reason to invest is to grow your wealth. Again, the broader definition of ‘wealth’ is personal to you, but it can include things like the money in your savings account, your investments, your house (if you own one), and so on.
Investing can help grow your wealth through compound returns. With compound returns, you’re not only making a return on your initial investment, but you’re also making returns on your returns. These returns add up over time, meaning that if you keep your money invested, you could meet your goals faster than you might otherwise.
Options to live the life you choose
While making money from investing in shares is one way to grow your wealth, people don’t grow their wealth just for the sake of it; they do it to help create the kind of future they want.
For some, this could look like achieving specific goals (like buying a house, having enough money for retirement, etc.).
For others, it could look like having more choices and greater flexibility in life. Growing your wealth and building a sturdy financial foundation can make it easier (and lower risk!) to make life decisions—with more options available to you.
For example, if you’re getting regular income from your shares, you could potentially afford to spend less time working, and more time on your hobbies or with your friends and whānau. You could have more flexibility over where you choose to live, greater ability to support causes you care about, the option to start a business … the list goes on!
Backing a future you believe in
When you buy shares in a company, you become the owner of a tiny slice of the company. By investing in the company for the long term, you’re not only showing that you expect and want the company to be worth more in the future—you’re also advocating for the kind of businesses that you believe should exist in 10 years, 20 years, or more.
Once you’ve become a shareholder, you can also influence the future of a company by voting on some of its big decisions at annual shareholder meetings. The more shares you have, the more influence you can have on the company’s decision.
So as well as growing wealth for yourself as an individual, you can use investments today to support companies you believe in and want to see exist in the world. The more wealth you have, the more impact you’ll have when you do this.
Creating the future you want
No matter which way you cut it, investing is about building a future that works for you. This might be personal, and could include things like retirement, owning a home, or supplementing your income. It might be for your family. It might be for charities, or to support specific companies. Either way, the more wealth you have, the more choices and control you have in the future. How you use that power is up to you.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.