So you’re one of the lucky people that has some money left over each and every month, and are wondering whether you should just save it in the bank, or start to build up a portfolio of investments. This is a tricky decision to make, and can be worth thousands in either the black or red in the future, so it’s not one to be taken lightly. All in all, it depends what kind of person you are.
The critical reason for investment is that money loses value over time – stick a few thousand under your mattress and it won’t buy you as much stuff in ten years as it would right now.
Those who put their money in a bank hope to beat inflation, meaning their money is worth just as much when they do decide to use it or leave it to someone else. Banks generally offer accounts that have an interest rate slightly above the base rate. Those who invest however, are looking for more than just keeping their head above water; they want their money to make even more money. Check out this interesting video here on why inflation is the enemy of the investor.
Picking Your Portfolio
This is done through a number of means, and money is often spread across numerous different assets. An investor might put their money into everything from stocks and shares, to physical gold or even foreign currencies. It’s hoped that these assets will rise considerably in value over time, and this Telegraph article might help you further understand investment.
This might be done manually through a variety of providers, or the investor might decide to give his or her money to a company who acts on their behalf, and makes the financial decisions. Some investment opportunities can make a lot more money than others, which is why this is a complex process, and financial advice is almost always essential.
Weighing Up Risk
What all forms of investment have in common however, is that they carry a certain degree of risk. This is the critical factor that makes investment right for some people and not others. It’s almost impossible to avoid risk completely when you’re dealing with investment, and while the majority of reputable investment products turn out to be successful, it is entirely possible to lose money. The vast majority of an investing company’s day-to-day business is working out how to mitigate risk and ensure that it doesn’t become too much of a problem.
Ultimately, the decision to save versus invest is how open you are to risk. If you can stomach the idea that your money might not be quite so valuable in a few years’ time, with the chance of a good payoff, then investment is a very good option, because in the best scenarios it can earn you huge amounts. If you can’t afford to lose anything however, then you might be better sticking with a bank.
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