Knowledge and practice of investing are crucial for all professionals, regardless of their specialization, if they want to secure and improve the financial well-being of their families and children.
It's not necessarily about "working in investment banks" in the strict sense of becoming Wall Street traders or analysts, but about understanding investment mechanisms to make your money work for you, beyond your professional salary.
A professional, like anyone else, earns income from their work, but a salary alone doesn't guarantee financial security. Here's the key to why investing is essential:
Money simply left in a traditional bank account loses purchasing power over time due to inflation.
Smart investing seeks to generate returns that, at a minimum, exceed the inflation rate, allowing wealth to maintain or increase its real value. Investing allows the profits generated by capital to be reinvested, generating even more profits in an exponential cycle known as compound interest.
Transforming savings into investments creates an effect often referred to as the "eighth wonder of the world" and is a fundamental tool for long-term wealth growth, especially useful for retirement planning or children's college education.
The wealth generated by investments can finance significant life goals that could not be met with monthly income alone, such as children's education, university tuition, postgraduate studies, or specialized training.
It can also help accumulate capital for purchasing a home or a second property.
Retirement benefits provided by traditional pension systems may not be sufficient; investing creates an additional financial cushion.
It also allows for the creation of a solid financial reserve for emergencies or unforeseen family events.
It's important to understand that investing involves allocating capital long-term to financial instruments or assets with the goal of growth (e.g., buying an index fund, investing in real estate). This is what every professional should do.
Working in an Investment Bank involves participating in complex and specialized activities such as mergers and acquisitions, high-frequency trading, and bond issuance. This is only relevant to a very small group of financial professionals.
For most, the goal is smart wealth management, not a career in finance.
Investing becomes a necessary extension of professional life, transforming income earned through work into capital that works for the family. Knowledge is the tool that allows you to go from being a simple saver to a strategic investor, securing your family's future.
Would you like to learn how to make your own investments?
Contact: fs1950@gmail.com
Professor of Capital Markets and Finance
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