The way ‘your money’ can make ‘more money’ is called investment. The logic of ‘money making money’ is this; suppose you have some extra cash and presently you have no need for it. In this case you can lend that money to a business man who needs it for expanding his business. In turn the business man will pay you interest on your invested money. This way you are the lender and the businessman is the borrower. You earn interest and the businessman uses your money to grow his business. This is a win-win situation for all (lender and borrower). The lender does not think that lending money is a charity, because if he/she is not lending his money, his money is actually getting eroded due to inflation. So, in order to keep his money stronger, the lender is also equally interested in this deal. There is not master in this cast.
Benefits of Investing
People often confuse investing with trading. Trading in share is more like gambling where people ‘hope’ to make money in short time. But when you are investing money you are ‘sure’ to make money, but the investment horizon in long term. The main benefit that investment provided is compounding of money. The interest that investment generates are certain in short term so compounding itself is not certain in investment holding is short. So long term investment is of prime important. This investment realization if the most fundamental to achieve long term benefits. The ultimate goal of investment is to achieve financial independence…
How to Invest Money
If we do not know how to invest money it is like not knowing how to walk. It is both good and bad that ways to invest money is not taught in schools. It is good because I feel not many people including our teachers) knows how to invest money. So if they will teach us how to invest money it will not be very useful. It is bad because, as our teachers do not know about investment, they cannot teach and hence we start to learn to invest money too late. For many, investment is so complicated that it is not even discussed at home between parents and kids. For people who does not make lot of money they often shelves themselves from investment saying that it not for common man.