Whether we are investing in stocks, government bonds, business, farming ventures, land, real estate, education, intellectual property, health or our children and several other investment
tools there are several reasons why we invest.
We invest so that WE DO NOT HAVE TO WORK FOR THE PURPOSE OF GENERATING INCOME for the rest of our lives. We all hope to find ourselves in a position where we are not working to pay the bills or meet financial obligations but instead work for passion as the primary objective of working. We make investments that will generate more money for us in future with us making minimal effort towards the same. Money in investment can be made through interest earned or by buying and selling assets in capital gains made in assets over time.
Consider the time value of money, where a penny held in the hand today is of more of value than a penny in future. Because of rising inflation, the value of money is eroded with time hence the reason for people to make investments whose appreciation in value MITIGATE THE RISK OF MONEY LOSING VALUE through inflation. For this reason, when making investments people INVEST IN ASSETS THAT HAVE CAPITAL GAIN as opposed to capital loss. That is invest in assets whose value increase in time as opposed to those that lose value. For this reason purchasing a car does not increase your asset base as it depreciates in value over time, however if the same car helps you in generating income say movement from one place to another as you search for income, as a taxi then in that sense it is an asset.
Many people also invest to MINIMIZE TAX RETURNS. By making investments in certain investments tools e.g. pension plans, purchase of homes ones tax obligation may reduce. Finally people invest for ANTICIPATED EVENTS IN FUTURE e.g. children’s college education, luxury holidays, retirement planning or other lifetime goals. Consider the liquidity of investment tools. Some investment tools can be easily converted into cash e.g. shares in companies are easily changed to cash as opposed to land. Do you agree with these reasons why people invest? Can you think of other reasons why people invest?
July 2017 -#Operation Inua Maisha
A Focus on Leadership and Investment Opportunities
© Kwambie Nyambane, July 2017.
The writer of this article is an independent business development consultant. Her practice is
currently based In Kenya. She has a wealth of experience in business and financial planning
through her professional experience over the years. She is an M.B.A. of the University of
Nairobi. She is also a wellness and inspirational writer and is the founder and lead writer of
www.wachanikwambie.com blog. You can contact her on business development and
financial management consultancy issues.