Investment: Why should I invest?

When you invest your money, you should be prepared to accept that the value of your investment may go down as well as up in the short-term. So why would you invest rather than save? Indeed, there are some occasions when you should NOT invest:

• You need to access the money in less than five years.
• The financial consequences of a loss are too great for you to take the risk.
• Your tolerance to the ups and downs of investment markets is low.
• When you have enough cash and can afford NOT to invest.

But most of us cannot afford not to invest and exposure to some investment risk is necessary to achieve our financial goals. This is because over time, inflation reduces the purchasing power of cash (especially after tax and costs).

To make your money grow faster than inflation you need to invest some of your money in growth assets, like company shares.

But this also means having to accept that your investment may go down as well as up over short periods. Getting the right balance between investment risk and reward is crucial.