Many people realize the significance of savings and investing, yet only a few successfully plan and work out how to. Savings is one of the most important things that you must consider in securing your family’s future. Having enough savings will spare your family from financial troubles later on in life. At the same time, it will also provide you and your family a good and comfortable life.
Savings and investments are two different things. Savings are money that is kept without growing, while investments are assets or anything that has potential for a substantial increase in monetary value. Investments grow their values in time giving you profit. Savings are intended for emergency funds and must be kept somewhere accessible like banks.
Both savings and investments are very important. Since savings is generally defined as emergency funds, its purpose is to provide you money in case of emergency keeping you from resorting to debt. Investments are intended for you and your family’s future. Investments grow but they need time.
It is not advisable to put all your money in savings or investments, it must be diversified. Diversifying means putting your money in both savings and investments to protect you from present or short term situations and your family’s future. The dilemma that most people face is how and where to invest. Here are some simple investment vehicles to consider:
1.) Mutual funds – Mutual funds are by far the simplest and most convenient forms of investments. In mutual funds, fund managers handle the pool of money in your behalf. Fund managers are professionals and experienced individuals in the field of investing. Mutual funds give a yield of an average of 12% a year, some 10 times higher than normal bank rates. Financial planners may suggest investing in mutual funds instead of acquiring plans such as education savings and low-yield retirement plans.
2.) Stocks – If you want a little adventure and want to be in control of everything, try investing in stocks. Investing in the stock market yields great potential. Some good investors earn somewhere between 50% to more than 100% in a year especially if the market is doing good. Put your money on large cap or blue chips stocks. These stocks are stocks of huge, stable, and very profitable companies. As long as the company is earning, the stock will rise and give folds of profit.
3.) Bonds – Bonds are relatively safe investments (at least in comparison to stocks). Bonds use the concept of debt. When you invest your money in bonds, you are lending your money to the government or large institutions that need capital. Bonds are different than stocks because in bonds, your money is being borrowed, in stocks, you buy shares or become an owner of a certain company (as long as you have stocks). Bonds normally give around 5% to 12% annually, some may give higher than that.
4.) Cooperatives – Cooperatives give fixed interest rates that are higher than banks, and they give dividends. Cooperatives are readily accessible because they are almost everywhere. Aside from earning an interest and dividends, some cooperatives also give members access to loans. Cooperatives generally give 15% to 25% yield annually in the form of dividends.
5.) Venture capitalism – Know somebody who’s got a great business or investment idea but lacks cash? You can provide the financial support and split the profit. Venture capitalism is what many investors do. They are constantly on the lookout for good ideas to put their money in, and let it grow. On average, a good business can provide a return on investment of around 10% to 30% annually. It is wise to invest in venture capitalism if you know who your partner is.