To Invest Or Save?
Saving vs. investing – savings means to slowly put money aside into places like banks, whereby investing means to use your money and grow it by investing in products or services that will increase in value. As consumers, we are always told to keep at least three months of living expenses saved as an emergency fund. Why not take a small percentage of your savings and invest it? Investing is still a far better savings than holding your money in a savings account. To date, the national interest rate on savings accounts is only 0.08%.
Investing takes patience because the stock market is a fluctuating tool. It is not a get quick solution especially for short periods of time. There are investment options that involve both a long-term solution and a short-term solution. Actually, as an investor, the best solution is a mix of both long-term investments and short-term aggregates. So, ready your loose change, budget your spending, pack your lunch instead of buying it every day, then take your extra cash and decide whether your extra money investment will be long-term or short-term.
Long-term investments pay off higher over several years, perhaps 5 to 10 years. Typical long-term investments can include the following:
*real estate investment stocks (REITs)
*mutual index funds
When investing long-term, even with stocks and mutual funds, you can afford to be more aggressive to receive a higher rate of return. To guarantee a higher return rate, simply determine the return that you plan for, then look for that fund that will, in the long run, average out to what you need. Just be prepared for the market to fluctuate as when stocks may drop. Don’t worry or panic, and do not sell.
Why shouldn’t you sell? Because as any investor can tell you, the stock market fluctuates up and down, but it always recovers. Plus, if you pull out when prices are low, you can easily lose a lot of the money that you have already invested. Long-term investments in the market will recover in time. Also, choosing to invest long-term is based on what your future investment goals are, i.e., retirement, college for the kids, a future trip, or other plans where you don’t need the money for at least 3 years.
A short-term investment plan is one that you plan to only keep for about 3 years or less and then you will sell or cash-in. Short-term investment vehicles include the following:
*certificate of deposits
*money market funds
*5-year treasury securities
When investing in stocks for the short-term, educate yourself on stock purchases within the stock market. Trying to get higher returns on stocks by trading short-term is a tricky business. To keep your short-term portfolio in the growth mode, choose funds that share their risk within different types of stocks. With short-term investments, remember the slogan of “invest only the money that you are comfortable in losing.”
As you can see, there are pros and cons to both investment solutions which is why it is wiser to invest in both depending on your future short and/or long monetary goals. Short-term or long-term investment overall is an interesting financial ride. Investing is a good financial growth tool which everyone should try after performing your due diligence research. An investor’s portfolio should carry a mix of short-term and long-term investments, nationally and globally with a larger percentage of cash in solutions that are not high risk.
Remember that at some point in your investment journey, you will lose some money. However, if you have been investing in a company as part of your long-term investment solution, you will have a better chance of growth rather than risk. As we discussed, a risk is greater in short-term investments, but when you hit it just right, your gain is greater.
If you are still wondering if you should invest, just think of this: investing helps you prepare for a secure future. When you bank your savings, your return will only be the amount you initially started with. However, when you invest in either short-term market vehicles or long-term market vehicles, you will generate more money by buying or selling portfolio assets that increase in value.