Why investing makes sense

There are many personal reasons why someone might choose to invest or might choose not to.

From a rational perspective, the below arguments justify why investing does make sense.

Historical data

History has taught us that investing can result in a 7% return on investment which accumulates over time. To exemplify this:

John starts investing with 5.000 USD and contributes another 300 USD a month, for 30 years. Every year he makes an average 7% return and reinvests this into his account. John has built up nearly 400.000 USD after 30 years.

As the below investment calculator shows, his total wealth is 2.5 times more than what he deposited into his account.

If a market crash happens

The stock market is unpredictable, and crashes do happen. Some minor, some as serious as the 2008 dot com bubble.

However, the market has not only recovered from crashes but continuously hits a new all-time high when you zoom out and look at medium to long-term development.

This means that although money invested prior to a crash will drop significantly, it will bump back and then some given enough time.

Losses only incur when investments are sold at a lower price than they were bought, any daily snapshot of your total portfolio value is a mere picture in a multi-decade long movie.

Unless a crash happens right as retirement hits, the risk is worth the return. Note, this only counts when investing money, you can afford to leave it untouched for long periods of time.

If inflation continues

It’s likely and expected that inflation continues to rise over time. With banks hardly providing any positive interest rates, investing is the more logical choice to offset inflation.

If a full economic collapse occurs

Should our entire worldwide economy fall, then everybody loses, as we are all turned financially poor by a great equalizer.

However, given that event is unlikely, growing wealth through investing is the more logical choice.

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