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.
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.
Diversification can reduce risk
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 >
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.
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FAQs
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.
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.
Why is investing important? ›
Investing money is done with the goal of building a sizeable corpus over time. Capital appreciation is an important long-term goal that helps people plan for their financial future. To grow your money, you need to consider your investment objectives and options that can provide high returns.
Why should I invest in WFC? ›
Shares of Wells Fargo have increased 26.17% over the past quarter, and have gained 59.95% in the last year. On the other hand, the S&P 500 has only moved 4.14% and 27.07%, respectively. Investors should also take note of WFC's average 20-day trading volume.
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.
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.
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.
What are the three main reasons for investing? ›
Why Consider Investing?
- Make Money on Your Money. You might not have a hundred million dollars to invest, but that doesn't mean your money can't share in the same opportunities available to others. ...
- Achieve Self-Determination and Independence. ...
- Leave a Legacy to Your Heirs. ...
- Support Causes Important to You.
In fact, you shouldn't invest unless you have a solid emergency fund in the bank. You need cash on hand so you can take care of emergencies and other short-term monetary needs. Once you've got that taken care of, you can start investing—but only to achieve long-term goals.
How does investing make you money? ›
Your investments can make money in 1 of 2 ways. The first is through payments—such as interest or dividends. The second is through investment appreciation, aka, capital gains. When your investment appreciates, it increases in value.
Wells Fargo's analyst rating consensus is a Moderate Buy.
Is Wells Fargo safe to invest with? ›
Is Wells Fargo FDIC Insured? 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.
What is investment in simple words? ›
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.
What is the general rule of investing? ›
Diversification is one of the most fundamental rules of investing and allows you to take a middle road through the extremes of market performance, allowing your investment to grow regularly with smaller fluctuations along the way. Diversification is the most effective means of managing risk.
How to invest your money wisely? ›
First, open an investment account based on whether you are investing for retirement, education, a kid or another goal. Select investments—such as stocks, bonds, funds or real estate—that match your risk tolerance. Minimize your exposure to risk by spreading your money across a range of asset classes.
What percentage do Wells Fargo Advisors charge? ›
Fees Wells Fargo Advisors charges for its services
For investment advisory services, Wells Fargo generally charges clients based on a percentage of assets under management. The rate clients will pay varies based on the product and services used, generally ranging from 2% to 2.50%.
What is the difference between Wells Fargo Bank and Wells Fargo Advisors? ›
Wells Fargo Bank, N.A. provides investment management services as part of its trust and fiduciary services, deposit products, lending products and other bank products. Wells Fargo Advisors provides investment advisory and brokerage services.
Should I invest on my own or with a financial advisor? ›
Those who use financial advisors typically get higher returns and more integrated planning, including tax management, retirement planning and estate planning. Self-investors, on the other hand, save on advisor fees and get the self-satisfaction of learning about investing and making their own decisions.
How do Wells Fargo Advisors make money? ›
Our financial advisors' compensation may be based on a combination of commissions and fees (cost) generated from a variety of products. These include stocks, bonds, derivatives, investment-company products, and insurance products (if they hold the appropriate state insurance licenses).
