Question

All of the following are reasons to invest, EXCEPT…

To minimize the impact on inflation, which causes you to lose purchasing power
To earn a consistent rate of return with lower risk than typical savings accounts
To build wealth by reinvesting your returns and allowing them to compound
To earn higher average rates of return than you would in a typical savings account

Answer 1

All of the following are reasons to invest, EXCEPT to earn a consistent rate of return with lower risk than typical savings accounts.

Therefore, the correct answer is: option 'To earn a consistent rate of return with lower risk than typical savings accounts'

Step-by-step explanation:

Investments such as stocks, bonds, and mutual funds come with varying degrees of risk and return. Savings accounts offer very low risk and thus have very low returns.

In contrast, bonds have higher risk and potential for higher returns, while stocks are considered the riskiest but also offer the chance for the highest returns over the long term.

The reasons to invest include:

1. To minimize the impact of inflation and preserve purchasing power
2. To earn a consistent rate of return with lower risk than typical savings accounts
3. To build wealth through compounding returns
4. To earn higher average rates of return than in a typical savings account

Therefore, the answer to the question is that there is no reason to invest except to minimize the impact on inflation, which causes you to lose purchasing power.

The premise of investing is that the higher average return justifies the higher risk taken. If an investment like stocks did not provide a higher potential for returns, it would not be as attractive to investors. Additionally, investing allows you to combat the effects of inflation and to build wealth through the power of compound interest.