Saving vs Investing: Understanding What Works for You
Not sure if you should save or invest your money? Many individuals often struggle with this notion of whether they should save vs invest their money. Throughout your life, you’ve likely found yourself setting aside a specific amount from your paychecks each week into your savings account. While this is essential towards building income security, it doesn’t offer significant returns like an investment would over time.
Saving vs Investing: Should I Invest?
Just as you’re setting aside money for the future when you save, investing is the same but with a bit of a twist. You’re not just stacking up your money in a savings account, but you are putting it into various ventures that could bring positive returns.
However, while investing may be an exciting venture, it’s important to note that investing comes with risks, depending on the type and how long you would be investing for. It also comes with various fees.
To further explain what investing looks like, here is a simple scenario: You just bought a plot of land for $25,000 with the belief that it will rise in value within a year. When the new year comes, the market is in your favor, and you resell it for $30,000. That means you gained $5,000 from your initial investment.
While investing may sound relatively easy, it’s a bit more complex. Just like you have the chance of gaining some money on your investments, you could also run at a loss. Investing involves calculated risks, which could be higher for some types. However, the benefits of investments with higher risks are high as well. See it as a high-risk, high-reward model.
3 Common Types of Investments
Sometimes, the government or private companies issue bonds that help put together finances for their operations. You could call it borrowing, but this time you’re the lender. With bonds, you’ll be holding a part of this debt with the possibility of gaining interest when it’s paid back.
This low-risk investment involves handing over your investment decisions to a fund manager who will handle all investments on your behalf. Since fund managers are experienced, you will pay a fee in exchange for the knowledge they bring to the table.
This is arguably the most popular type of investment. Buying stocks gives a percentage of ownership in a company, where you can watch how it performs on the stock exchange and potentially make substantial gains. However, this type of investment strategy also means that you’re buying the company’s risk as well.
So, Which Strategy is Right for You?
Saving should always be part of your financial strategy, even if you decide to grow your money through investments. This is because it helps provide financial security, so you can pay for emergencies when they arise. To ensure you make the best financial decisions, Tobin & Collins is here to make certain your money is as safe and maximized. Contact us today by filling out our online form or calling us at 201-487-7744.