Investment on the other side of saving

What is an Investment?

Yes we all want to be wealthy right? We all want to live the life that most of us dream about, the life where we are forced into decisions because we financially dependent on someone else for the material things that “supposedly bring us joy”. Yes, I still insist that what will and does ultimately make us happy is more than just the amounts of cents and emalangeni that sit in our accounts daily.

An investment, on the other hand of saving

An investment on the other hand of a saving, is solely structured for wealth creation. Simply defined, an investment is money that you put aside with the understanding that it will not be needed for many years, the exact number of which differs from one individual to the next.

Investments involve greater risk, but, investments must also yield much greater returns when left alone long enough to ride out the turbulence of the stock market. When you're investing, you give your assets the potential to grow over time. You typically reinvest your interest, dividends, and capital gains earned.

Often you are prepared to take a little more risk with investment money than you are with your savings. With the opportunity for growing your money comes the risk that your account value may decrease. If you have many years before you need the money to reach a goal, such as your child's college education or your retirement, you may have time to recover from small decreases in value. So in essence the reality is that;

When you "invest," you have a greater chance of losing your money than when you "save." Unlike insured products, the money that you invest in securities, mutual funds, and other similar investments is not risk free. You could lose your "principal," which is the amount you've invested. That’s true even if you purchase your investments through a bank. But when you invest, you also have the opportunity to earn more money than when you save.  There is always a tradeoff between the higher risk of investing and the potential for greater rewards.

That is why most people do not become wealthy, that is because they refuse to take the risks that are associated with the journey towards wealth, and yes it is a journey, and not a marathon.  

 

Growth

 

When you invest, you are buying an asset that you expect to grow in value. Since the value may fluctuate, it is always best to invest money that you probably won’t need in the near future. You will want to be able to sell when the market conditions are favorable, and not on short notice.

Investment choices range between (and we will discuss these in detail soon)

§  Individual securities — such as stocks and bonds

§  Pooled investment products — such as mutual funds and exchange-traded funds

§  Estate planning and real estate

§  Retirement plans

§  Rare investments like art pieces and precious metals

You will need to find investments that fit your goals, time horizon, and risk profile. If the investments you choose make you nervous or uncertain about your future, you may be in an investment profile that’s too aggressive for your risk tolerance.

Getting the most from your money means understanding the difference between saving and investing — and how to use both. Saving alone may not provide the opportunity to grow your money at a sufficient rate. Yet, relying solely on investing could leave you without easy access to enough money in an emergency.

Understanding the difference between saving and investing helps you put your money to work toward your goals and then ensuring that goals are not just dreams but that they become achievable