Why Investing is Important | Wells Fargo Advisors (2024)

Having a savings account isn’t enough

Saving money is important, but it’s only part of the story. Smart savers start by building sufficient emergency savings within a savings account or through investment in a money market account. But after building three to six months of easy-to-access savings, investing in the financial markets offers many potential advantages.

Why is investing important?

Investing is 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.

The power of compounding

Compounding occurs when an investment generates earnings or dividends which are then reinvested. These earnings or dividends 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 stock, 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. Read about the power of compounding and the cost of waiting.

The risk-return tradeoff

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

Diversification can reduce risk

Diversification can help mitigate investment risk by choosing different investments and types of investments. See why diversification is important.

Learn the basic investing types

When it comes to investing, you have many options. Before deciding which investment vehicles are appropriate for you, it'll help if you know what they are, how they work, and why they may be a good fit for your needs.

Learn about investment types >

Products to consider

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.

Investment and Insurance Products are:

Not Insured by the FDIC or Any Federal Government Agency
Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested

Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.

Retirement Professionals are registered representatives of and offer brokerage products through Wells Fargo Clearing Services, LLC (WFCS). Discussions with Retirement Professionals may lead to a referral to affiliates including Wells Fargo Bank, N.A. WFCS and its associates may receive a financial or other benefit for this referral. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.

Insurance products are offered through non-bank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.

Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.

CAR-0323-04277

LRC-0323

FAQs

Why Investing is Important | Wells Fargo Advisors? ›

Investing is 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.

Show Me More ›

Should I invest with Wells Fargo Advisors? ›

Wells Fargo Advisors insurance and investment products aren't backed by the FDIC or other government agencies. That said, you're always taking some amount of risk when you invest your money. Ultimately, Wells Fargo Advisors is a good option for investment services and other financial products.

Learn More ›

Why is investing important? ›

It is a great source of passive income

This can be your investments in Fixed deposits, equities, Mutual Funds, properties, and other assets. These investments will continue to earn returns for you even when your regular income stops and enable you to tide over the situation comfortably.

Learn More ›

Why invest in Wells Fargo? ›

Earnings Growth: Wells Fargo's earnings have witnessed a rise of 17.86% over the past three to five years, higher than the industry's growth of 6.17%. While the company's earnings are projected to decline 7.7% in 2024, it will likely rebound and grow 9.7% in 2025.

Read On ›

Why is investing important in an economy? ›

Investment and Economic Growth. Investment adds to the stock of capital, and the quantity of capital available to an economy is a crucial determinant of its productivity. Investment thus contributes to economic growth.

Find Out More ›

Is my money safe with Wells Fargo Advisors? ›

At Wells Fargo Advisors, cash deposits are covered by FDIC insurance for a total of at least , if you are enrolled in our Bank Deposit Sweep Program. * Through this program, uninvested cash balances (principal and interest) are automatically deposited, or “swept,” into three affiliate banks.

Learn More Now ›

Is investing with an advisor worth it? ›

The right decision is going to depend on your unique financial situation and how much you can afford to pay an advisor. If all goes well, then the length of time shouldn't be an issue to you, financially, because the returns can more than pay for the advisor's contributions.

Show Me More ›

Why is it worth it to invest? ›

Investing provides the potential for (significantly) higher returns than saving. As your investments grow, they allow you to take advantage of compounding to accelerate gains. Investing offers many different access points and strategies, from individual stocks and bonds to mutual or exchange-traded funds.

Know More ›

Why is investing wisely important? ›

Making a clear decision about how much risk you're prepared to take (and sticking to it) is crucial to ensure your investments are suitable. If you take too much risk, your capital could be eroded quickly, too little risk can mean that your money isn't working hard enough.

Know More ›

What is the primary purpose of investing? ›

Investment definition is an asset acquired or invested in to build wealth and save money from the hard earned income or appreciation. Investment meaning is primarily to obtain an additional source of income or gain profit from the investment over a specific period of time.

See Details ›

Can Wells Fargo Advisors be trusted? ›

Wells Fargo Advisors is not a trusted broker because it is not regulated by a financial authority with strict standards. We would not open an account for ourselves with them. If you want to stay safe, only sign up with brokers that are overseen by a top-tier and stringent regulator.

Keep Reading ›

How safe are Wells Fargo investments? ›

Yes, Wells Fargo is FDIC insured. 11 However, FDIC insurance only covers specific accounts, like checking and savings accounts, up to $250,000. FDIC insurance does not cover any accounts invested in stocks, bonds, or ETFs; those accounts will fall under the SIPC.