Saving or Investing
How do you decide where to put your money?
People are well aware that they need to save money. That being said saving in itself is not really going to help you; you have to do something with the money. That means that you will need to invest your money. A lot of people are afraid to do this but there is really no reason to be afraid if you know what you are doing.
What are the differences between saving and investing? Your "savings" are usually put into the safest places or products that allow you access to your money at any time. Examples include savings accounts, checking accounts, and certificates of deposit. When you "invest," you have a greater chance of losing ...view middle of the document...
In fact some carry virtually no risk at all. If you are worried that you are going to lose your money you will want to make sure that you stick to very safe products like certificates of deposit or guaranteed investment certificates. That being said if you are willing to take on a little bit more risk you will earn a much larger return. As long as you properly diversify your portfolio the risk should be minimal.
One other reason that a lot of people worry about investing their money is that they are concerned that they are going to need that money. Again this is a legitimate concern but not one that should unduly worry you. Certainly there are some investments that are not particularly liquid that can be a problem if you need money right away but you would be foolish to put all of your money into these investments anyway. It is important to make sure that at least some of your money is invested in things that you can easily get out if it if necessary. In normal conditions the risk scale would broadly run – from low to high – developed market government bonds, corporate bonds, property, high-yield bonds, developed market shares, emerging market shares and finally commodities. However, investors must also take account of market conditions. Every asset class has a cycle and it is best to try and buy when an asset is cheap and avoid it when it is expensive. A good example would be the technology boom that ended in early 2000. If you had bought at the top of the market, you would have lost a lot of money but, if you had invested just a few months later, you would since have done very well.
Simply put, saving is where you regularly put money in a bank or building society account and let it accumulate – ideally with the help of a decent rate of interest. Investing is where you put your money to work in the stock, bond or property market, accepting the possibility of short-term loss in the hope of enjoying a greater return over the longer run.
An investment simply means that you have put aside a resource for future use with the hopes of gaining a return on that money. A person can invest in anything from baseball cards and stamps to real estate and stock investments.
How to invest? If...