Hello, this is Pooh.
Today, I would like to discuss the importance of investing and why it is necessary to consider it.
Do you aspire to have a stable financial life in the future?
Many individuals are looking for ways to effectively utilize their money and build their assets.
That’s why investing is currently gaining attention.
So, why should you invest?
In this article, I will introduce the significance and benefits of investing.
Please take them into consideration for your future stable asset formation.
- The Importance of Asset Formation
- Investing as a Means of Asset Accumulation
- Increase in Assets and Pursuit of Returns through Investment
- Risk Management and Inflation Protection through Investment
- Practicing Investment
The Importance of Asset Formation
Relying solely on bank deposits is not sufficient for adequate asset formation
When we think of asset formation, the first thing that comes to mind is “bank deposits.”
For many people, bank deposits serve as a safe and reliable means of storing their assets.
However, the current interest rates for bank deposits have significantly decreased compared to the past, and this poses a problem.
For example, let’s take a look at the ordinary deposit interest rate of Mizuho Bank, which is 0.001%
Even with relatively favorable interest rates offered by online banks for fixed deposits, the rates range from 0.1% to 0.3%.
At the current interest rate levels, the interest earned from bank deposits is minimal, and it is not sufficient for asset growth.
Moreover, over a long period of time, the impact of inflation may lead to a decrease in the real value of assets.
If the interest from bank deposits is surpassed by the rise in prices, it results in a real decrease in assets.
Therefore, it can be said that relying solely on bank deposits is insufficient for pursuing future financial stability.
Investing as a Means of Asset Accumulation
One option to consider as a means of asset formation is investment.
Investing involves deploying funds with the aim of obtaining future returns.
Investment options include stocks, real estate, bonds, commodities, and more.
While investing carries risks, gaining appropriate knowledge and information can expand opportunities for asset formation.
In this discussion, I would like to use “stock investment” and “real estate investment” as representative examples.
The stock market tends to grow over the long term, making stock investment an attractive means of asset formation.
By investing in stocks, you can anticipate capital gains from company growth and increases in stock prices.
Additionally, stock investments can generate dividend income, providing regular returns.
However, stock investment also entails risks. Asset values fluctuate with stock price movements, so it is essential to be aware of the market’s volatility.
Investing in individual stocks carries higher risks, so investors need to exercise caution, make careful choices, and consider portfolio diversification.
Before starting stock investment, it is important to research market trends, examine the financial status of companies, and gather relevant information.
By the way, the investment strategy I personally practice primarily focuses on stock investment.
Real Estate Investment
Real estate is an investment that combines stability and growth as an asset.
There are various forms of real estate investment, but the main methods involve owning rental properties or commercial facilities.
By owning real estate, you can earn rental income and capitalize on capital gains resulting from property value appreciation.
The appeal of real estate investment lies in its stable cash flow and increasing asset value.
When you own rental properties, you can receive monthly rental income, ensuring regular cash flow.
Additionally, as property values rise, you can expect future profits from potential sales.
However, real estate investment also carries risks.
Market fluctuations in demand and supply, as well as regional economic conditions, can impact investments.
Moreover, property maintenance and management entail costs and effort, so investors need to pay attention to market trends and property selection.
By the way, I personally do not engage in real estate investment.
I feel that it requires a substantial amount of initial capital or borrowing, and there are many uncertainties regarding whether you can sell at a fair price and achieve a reliable return, making it a more challenging investment method in my opinion.
Increase in Assets and Pursuit of Returns through Investment
Let’s reconsider the characteristics of investment and why one should invest.
The primary purpose of investment is to increase assets and pursue returns.
By capitalizing on the growth and appreciation of investment assets, one can achieve future financial stability.
Investments also provide opportunities for generating returns.
For example, through dividends or profit distributions, investors can earn income from their investment holdings.
Asset growth and the pursuit of returns are crucial elements in realizing a financially independent future.
Investing enables the growth of assets.
Investment vehicles such as stocks and real estate can appreciate in value, resulting in an increase in assets.
For instance, in stock investments, there is the potential for stock prices to rise due to company growth and market expansion.
In real estate investments, property values may increase due to regional development and rising demand.
Asset growth may take time to materialize.
Investing requires a long-term perspective and should avoid being swayed by short-term price fluctuations.
Early investment initiation and consistent management are essential for future asset formation.
Pursuit of Returns
Investing also provides opportunities to pursue returns.
For example, through dividends from stocks or rental income from real estate, investors can generate regular income from their investment holdings.
This allows for supplementing living expenses and acquiring funds towards future goals.
In stock investments, dividends can be received from publicly listed companies.
Dividends are a portion of a company’s profits distributed to shareholders and serve as an important source of regular income.
Additionally, growth stocks offer the potential for capital gains through stock price appreciation.
In real estate investments, rental income can be obtained from rental properties.
Proper management of rental properties and receiving stable rent from tenants are crucial factors.
Moreover, if property values increase, there is the potential for future profits from selling the property.
In investment, it is important to consider the balance between risk and return to maximize earnings.
Typically, higher-return investments come with higher risks.
Investors need to assess the trade-off between profitability and risk based on their risk tolerance and investment objectives.