The Importance of Investing

These resources stress the importance of investing and social activism.

| June/July 2005

Importance of Investing

Investing is the best strategy for retirement.

Illustration courtesy Dave Channon

The Importance of Investing

Why should you invest? After all, isn’t it safer to buy certificates of deposit (CDs) or bonds, or just stash cash under a mattress? The short answer is that by investing, you stand a better chance of making money over the long term.

For example, CD rates currently are hovering around 3 percent, depending on how much cash you have and how long you’re willing to sock it away. (Visit for a rundown of current rates for CDs.) With rising inflation rates (the 2004 average was 2.68 percent), at best you’re only doing a little better than breaking even, and at worst, you’re actually losing money. That’s because even though you have interest income, those earnings are barely keeping pace with the cost of living, let alone going beyond it. Money stashed under the mattress does even worse because it pays no interest.

Investing is viable for just about any lifestyle. For example, if you save just $20 a week and put it in conservative, low-risk investments that earn an average of 8 percent (a return rate average investors generally can expect), you’ll have a considerable amount of money when you retire. After 20 years, that $20 a week will have grown to about $36,900. Over 30 years, your nest egg would more than double to nearly $76,000.epending on how that money is invested — such as through your employer’s 401(k) program — you could save on taxes, too, freeing up more money to invest. With online investment calculators, such as this one from Van Kampen, you can plug in different amounts and timelines for different goals. But regardless of the level of financial security you want when you retire, don’t look at investing as something you can’t afford to do. Instead, it’s something that you can’t afford not to do.

Community Investing

When is an investment considered successful? The traditional yardstick is that not only do you still have the amount originally invested, but you also have money coming in, in the form of dividends or, if you sell an investment that went up in value, as a profit.

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