Keeping Investing Simple: Only 2 Real Reasons Why We Invest

This post is not about saving money. There are many reasons we all need to save money. It may be for retirement, a new Porsche, an emergency fun or those pair of 7 For All Mankind jeans you had your eye on. Instead this post is about dividend investing and the only two reasons that people truly invest their money. Without adding to the suspense, here are those two reasons:

1. To stay ahead of inflation

As we have recently seen, prices of goods can go up. The only way to protect our savings is to invest it in products that have the ability to grow at a faster rate than that of inflation. Over the long-term, investing in equities has proven to grow faster than inflation and provides that financial security that comes with increased buying power.

2. To achieve your financial goals

I suggest that these are not those short-term financial goals as previously mentioned (the Porsche, the emergency fund). The reason for this is simple. Investing is not a short-term exercise. For investing to pay off it takes 5+ years of time. Any shorter than that and your risk of losing money is substantially higher.

Instead, the second reason to invest is to achieve your longer term financial goals such as retiring from work to live a life of leisure. Or it can be investing your money to provide a certain level of income during retirement. It is up to you to determine what that financial goal is, but the key is that it is more than just a new car or a new pair of jeans. You can save for those. You invest for those long-term outcomes in your life that you want to make happen.

To beat inflation or to meet your long-term goals, those are the reasons that I am a dividend investor.

• Writing Down Your Financial Goals
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• Weekly Dividend Investing Roundup – April 4, 2008
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