There are features unique to both financial saving and investing, and understanding their different attributes is important. Saving preserves and protects money, while also accruing compound interest, whereas investing allows money to grow within share market fluctuations. Both saving and investing are used as short and long-term strategies for financial gain.
Investing entails greater risk and is usually undertaken with astute financial guidance. On the other hand, saving money and accumulating capital is less complex and more familiar to most people. Saving with a bank is considered a safe alternative to rolling the dice on shares, especially if finances aren’t fluid enough to cover any losses. It’s possible to get rich quickly, but most fail trying, while the get-rich-slowly savings method will work for anyone with patience and foresight.
The get-rich-slowly financial investment
For the vast majority of Australian, consistent saving is the best strategy for long-term success. Saving always wins, and in a get-rich-slowly scheme, compound interest ultimately does most of the hard work for you.
Saving is investing in your future
Every savings or investment plan aims to satisfy future wants or needs, even if the goal is simply to accumulate more money. The aim is usually to reach those goals as soon as possible. Whether saving with a bank, or investing in shares, the best way to make money grow faster is to add additional funds whenever possible.
Adding to investment savings
Investors are also savers, or at least accumulators. Market volatility can make investors nervous, but there safe strategies to deal with the ups and downs. By continually adding funds to existing investments, shares are purchased at both lower and higher prices, ultimately resulting in dollar-cost-averaging. Adding capital to a portfolio has a lasting effect and can reap handy profits, especially if market annual returns average the desired 10% or more.
Double your savings and more
The simple ‘rule of 72’ helps savers understand how long it takes for an investment to double. Simply divide 72 by the rate of interest you are getting, and you have your answer. For instance, 72 divided by 6 means it takes 12 years to double the initial investment, whether is is $100 or a million dollars. Naturally, adding additional funds accelerates the process.
Short-term goals and long-term plans
Saving for the future is extremely important, but life goes on in the meantime. Long-term investments aren’t always mature and ready to be cashed in for important milestones such as commencing higher education or getting married, so preserving capital with a dedicated savings account is the sure way to access money when it’s needed. Investing in the futures also means investing in memories, so enjoying a little accumulated wealth set aside for special occasions is a sensible investment in itself.