Are you a saver or a spender? If you’re like most Americans, you’re likely part of the 59% who consider themselves savers, as reported by a 2019 Charles Schwab survey. But recent findings paint a different picture, with 63% of respondents in a similar demographic admitting to living paycheck to paycheck. This discrepancy highlights a significant gap between financial goals and actions.
From a young age, we’re taught that saving is the key to building wealth and achieving financial freedom. However, simply saving may not be enough. While it’s crucial to save, investing wisely can make those goals more attainable.
Many are hesitant to invest due to fears of financial loss. But by making informed decisions and choosing the right investment avenues, you can mitigate risks, increase rewards, and generate meaningful returns.
Why Invest?
Saving and investing go hand in hand. While saving provides the capital necessary to invest, investing allows you to keep pace with inflation and potentially benefit from compounding interest.
How Much to Save vs. Invest?
Saving 20% of your income is a good starting point. Build an emergency fund equal to three to six months’ worth of expenses before considering additional investments for long-term goals.
How Do Investments Work?
To enter the market, open an investment account like a brokerage account. You can buy stocks, bonds, and other assets through these accounts. Stocks represent ownership in a company, while bonds are debt investments. Other investment options include commodities, precious metals, and real estate.
Are You Investing Reasonably?
The best risk an investor can take is a calculated one. Consider your circumstances, risk tolerance, and investment goals when determining your portfolio allocation. Younger investors can afford to take on more risk, while those nearing retirement should prioritize stability.
Life’s fluctuations will impact your investments, so stay realistic about your financial situation and adjust your investment strategy accordingly.
Source: Harvard Business Review
By following these guidelines and understanding the basics of investing, you can navigate the world of investments with confidence and work towards achieving your financial goals.
