Why you should invest

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At some point, everyone needs to learn about investing—and understand the importance of taking calculated risks.

Let’s compare common investment options: cash, CDs, treasury bills, bonds, real estate, and stocks. These range from the lowest to highest risk, yet the average returns often fall in the reverse order. That’s because safer assets like cash and CDs don’t always protect you from inflation. For example, a 2% CD return with 3% inflation actually results in a negative real return—and that’s before taxes.

In a capitalist system, not taking risks can be costly. Still, smart risk management is key. Use protective tools like stop-loss orders and avoid leverage (especially options) when starting out. Think like a turtle investor—slow and steady—rather than chasing fast trades that could wipe out your savings.

The Difference Between Blind and Calculated Risk

There are two types of risk: blind and calculated. Acting on hot tips or TV recommendations is blind risk—akin to buying a house without inspecting it or checking the neighborhood. On the other hand, calculated risk involves using proven strategies for when to buy and sell. In the long run, disciplined investing in stocks with a clear plan tends to be profitable.

Adopt a Long-Term Mindset

Focus on value investing and hold for longer periods—typically a year or more. Rather than “Buy and Hold,” aim for “Buy and Monitor.” Some companies, like Enron, have collapsed entirely, so it's important to stay informed and flexible.

For More Experienced Investors

If you’re more seasoned, you might explore shorting, short-term trading, or covered calls. Even simple market timing strategies can reduce losses during downturns. A well-timed investment in a market ETF using basic timing rules could have outperformed the market significantly from 2000 to 2019.

Be Cautious With Who You Trust

Many hedge funds are mismanaged or even fraudulent (though there are exceptions). Avoid heavily marketed financial products like annuities and certain types of insurance. Always do your own research—never blindly trust others with your money.

Real Estate & Retirement Accounts

If you're handy and don’t mind managing tenants, real estate in growing areas can be very profitable—especially with the help of favorable tax laws. Take advantage of 401(k) matches and Roth IRAs to build long-term, tax-advantaged wealth.

Investing Benefits Society

Investors do more than grow personal wealth—they fuel innovation and progress. Their capital supports companies that generate social and environmental benefits, pay taxes, and fund philanthropic causes. At the same time, investors hold companies accountable when they fail to deliver value to society.