Help, I m Rich!: Your Compass to a Value-Adding Private Banking Experience

Chapter 2 Why Should I Invest?

It is often taken for granted that one should invest as soon as one has the cash to do so. But why is that so?

Based on experience, we know that inflation, spending, and taxes reduce (the purchasing power of) our wealth faster than we often realize. Through investing we compensate for these unavoidable wealth-diminishing effects.

Mr. Jones recently inherited US$5 million in cash and already owns a fully paid-up house, currently worth US$1 million. He is 35 years old and married, with two boys, aged 3 and 7. As the money arrived at a time that he happened to face serious difficulties at work, he took this windfall as an opportunity to say farewell to his not-so-beloved boss.

But now Mr. Jones has to plan for the future. He is still young. He wants to continue his lifestyle, only do the work he likes, become a healthy old man, and, upon his demise, pass on substantial wealth—preferably US$2.5 million—to each son. This should be feasible.

With such a vast amount of money, why should Mr. Jones invest at all? That’s a good question. In this chapter we will convince Mr. Jones that apart from it being fun, investing makes a lot of sense. But before we do that, we should first agree on what investment exactly means: An investment is the purchase of an asset or item with the expectation that it will generate income and/or appreciate in the future ...