How much does it cost to plan when thinking about the future？Want to buy a house?？Send your kids to summer camp.？pay their college expenses？hope to travel？start a small business？Investments can help you achieve this goal。

Investments may also play an important role in retirement savings。You may consider how long you expect to work, where you want to live, what hobbies you might have, and when you will work hard。Investing is the way many people accumulate wealth and prepare for immediate and long-term goals。

The secret behind investing: compound interest returns

Compound interest is sometimes called the eighth wonder of the world.？

Let's say you have an orange tree that bears the sweetest fruit you've ever tasted。The tree bears fruit every year, you pick some oranges and plant new trees。Year after year, you can cultivate more and more saplings, and the grove grows bigger and bigger。The same concept applies to investing (and reinvesting) to generate compound growth。

What it means to be an investor？

Investing is not just hiding money in a small box, but hoping it multiplies。When you buy stocks or exchange-traded funds (ETFs), you are actually buying part of a business (or multiple businesses)。Depending on your specific investment, it may also include some bonds or other assets。But essentially, you become part owner。As a shareholder, you will experience the ups and downs of the company, whether it is a substantial income when the company grows or a decrease in investment when the company declines。

Why doesn't everyone invest?？

We've had a tough time with the COVID-19 pandemic and a big market decline。In fact, many are not ready to start investing, and in many cases, young people have fallen behind。As of April 2022, about 58% of Americans own some of their stocks, but that's nowhere near enough for young Americans。In fact, nearly 60 percent of American millennials are not involved in stock market investing at all。

Why invest in the market?？

Fundamentally, investing is about risk and reward.。While a savings account can offer marginal interest rates, investing allows you to pursue greater long-term returns。

Over the past 32 years, assuming you reinvest all your dividends, the annualized return on investment for the S & P 500 is about 9.79%。In other words, between January 1990 and November 2020, the $100 investment that tracks the S & P 500 will increase to about 2,147 before fees and taxes are deducted..89 USD。

However, past performance does not guarantee future results, and all investments involve risk。However, the annual performance of the S & P 500 varies widely, for example, the index is up 21% from 2017..8%, down 4% from 2018.3%。

Although the U.S. stock market in general has grown over time, it is not a smooth or straight curve. This background can help you prepare for market turmoil。

Investment and Savings

To understand the potential difference between investing and saving, let's say you are 25 today and plan to retire at 65。What if you invested $100 a month in a fund that tracks the overall movement of the stock market?？

Let's say you start with an initial deposit of $1,200 and the fund you invest in grows by 6% per year over the next 40 years.。(does not take into account dividends, taxes or inflation。）

If you keep investing $1,200 a year and follow the ups and downs of the market, the funds could grow to nearly $200,000.。By contrast, if you put the same amount into a savings account that averages 2% a year, your total investment could grow to about $75,000.。(If you adjust the amount invested, the rate of return, or the interest rate on your savings account, you can see how the gap widens or narrows。）

In short: stocks are riskier。When investing in a company, part of your financial future depends on that company's performance。While savings are more stable (banks use your money to support other things, such as mortgages and car loans), there is less potential for growth.。

In addition, almost all bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.。

Another key consideration is liquidity, which is how easily your funds are available and how difficult it is to sell your holdings at fair market value？You must decide which savings and portfolio is right for you。

How Investment Grows？

Your investment can grow in two ways: appreciation and dividends。Appreciation means an increase in the value of something, and the same applies to stocks, appreciation means an increase in market value。The same goes for devaluation。

Dividends are your share of profits.。If you hold shares and the company is profitable, a portion of the money may be returned to you (the shareholder)。You have no control over whether the company is actually profitable or whether it distributes dividends, and the company may reduce or cease to pay dividends without notice.。

If you've ever heard of a stock being described as a "dividend stock," this usually means that investors treat the underlying business as a fairly stable company that pays investors a fairly reliable dividend。It may not be the hottest company in the space, but in general, it must be a tested and more mature company。

Your investment choices

Next, we will discuss some of the types of investments that accumulate wealth in different ways and generate different returns。In general, savings accounts are the least risky, followed by bonds and then stocks。

As a result, most investors will not choose just one type of investment。Instead, they create a hybrid basket (also known as a diversified portfolio) to manage risk and thus optimize returns。The portfolio may include funds that track indices, individual stocks, bonds and even real estate。Note that your portfolio is designed to build a portfolio that fits your and personal goals。