Why invest?

If you’ve managed to accumulate some savings and have more money coming in than going out, that’s great. However, savings – particularly when interest rates are low or inflation is high – may not offer you the best return on investment.

Investing, whether that’s in shares or other asset classes, could put you on track to grow your wealth over the short, medium and long term, and help you meet some of life’s goals:

• • Travel overseas
• • A new car
• • Owning a home
• • Children's education and more

The potential for higher returns

While cash savings accounts or term deposits offer low risk returns, the gains are relatively small compared to investments such as shares and property – which have historically outperformed cash through capital growth and more.

The impact of gaining an extra 1% or 2% per year on your portfolio might seem minimal, but it can make a material difference over a long period of time due to the power of compounding (we’ll cover this later) – provided you’re prepared to 'accept additional risk' of loss. Getting your money working for you and creating the potential for higher returns is the whole point of investing.

"The more your money works for you, the less you have to work for money."

- Idowu Koyenikan (Bestselling Author of 'Wealth for All')

When you make investments, it’s important to have realistic expectations about how they might perform. Hopefully, your money will grow over time – but there’s also a chance that it won’t.

Perhaps the biggest risk of all though is jumping in before you’re properly prepared. As you progress through CommSec Learn, we’re here to help support you with knowledge, tools, and ideas on how to invest.

Next topic: 1.2 The fundamentals