Why Invest?

Saving money is important, but it's only part of the story. After building an emergency fund with three to six months of easy-to-access savings, investing in the financial markets may offer many potential advantages.

Investing can be an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value.

The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.

Compounding occurs when an investment generates earnings or dividends which are then reinvested. These earnings or dividends can then generate their own earnings. So, in other words, compounding is when your investments generate earnings from previous earnings.

If you invest in a dividend-paying stock¹, for example, you might consider taking advantage of the potential power of compounding by choosing to reinvest the dividends. To help increase the potential benefits of compounding, start investing as soon as possible and automatically reinvest your dividends and other distributions.

Different investments offer varying levels of potential return and market risk.

• Risk is an investment's chance of producing a lower-than-expected return or even losing value.
• Return is the amount of money you earn on the assets you've invested, or the investment's overall increase in value.

Investing in stocks¹, for example, has the potential to provide higher returns. In contrast, investing in a savings account likely won't offer the same return potential but is considered less risky than investing in stocks.

The amount of risk you carry depends on your appetite - or tolerance - for risk. Only you can decide how much risk you're willing to take for the potential of higher returns. But if you're seeking to outpace inflation, taking on some risk may be necessary. An increase in risk may provide more potential for your money to grow.

¹ Stocks are subject to market risk, which means their value may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. Investments in equity securities are generally more volatile than other types of securities.

Investing involves risk including the possible loss of principal.

Dividends are not guaranteed and are subject to change or elimination.