Save or invest?
Building wealth and acquiring financial independence are constantly on the top of most of our minds. The strategic assessment relating to the best avenues for preserving capital and the correct allocation of one’s finances holistically between savings and investments is a critical part of a personal financial strategy. Delving into the crux of the choices you have between how much to save and how much to invest is an essential part of your financial wellbeing. Furthermore, when you do decide to start investing, where can you find good value for your money while keeping it safe?
Definition of Saving Money
The act of setting aside cash in safe bank accounts and securities (such as US Treasury bills) in a liquid environment which enables you to access the full amount in a fairly short time. These funds can act as a cash reserve for a rainy day, a volatile financial period or for a planned retirement when you might to utilize them.
One should almost always work on saving money prior to making investments. This comes from the perspective that the savings that you have form the financial ground for your financial trees to blossom. Your savings will provide you with the required capital to grow and nourish your investments. Over and above saving for the future you should be financially able to cover fixed personal expenses which include rent, mortgages, insurances and food bills up to a number of months over and beyond your pay check. This will reduce the pressure of having to scramble for financing if you were to lose your income tomorrow. Furthermore, savings are a continuous long term strategy to undertake, no matter what size your investment portfolio accounts to.
Definition of Investing Money
When investing you utilize your own capital to acquire assets that you believe will provide a safe rate of return after a specific amount of time, with the aim of acquiring a greater level of wealth. There are a multitude of types of investments and investment time periods also vary. The level of risk taken usually increases the volatility level of the stakes in your investment. When starting to invest it is recommended to invest in stocks, bonds and real estate which are classified as the productive asset class. The value of the assets in this class will appreciate over time and/or can produce a cash return.
Investment in Real Estate as a Good Way to Begin
Real Estate investments are one of the preferential long-term capital building avenues to take when starting to build an investment portfolio. Diversification within this investment class undertaken in a methodological manner of minimizing risk and not overexposing yourself is highly recommended. The real estate market works independently from the stock market and has been a mainstay part of investment policy for many decades. Real estate in general has shown greater performance in comparison to equities on a year to year basis and can also serve to protect the investor from inflation, as rental rates can be raised accordingly.
The opportunities available today on real estate social investment platforms have enabled new investors to enter a previously accredited investors market, and take part in equity deals starting from as low as $25,000. Owning a piece of a much larger project, along with experienced investors who have great access to deals and the knowledge to conduct the needed due diligence, is an empowering aspect which is driving more and more new investors to enter the market. It is now possible to conduct entire processes online with the ability to circumvent bureaucracy and utilize the wisdom of the masses to facilitate better decision making in shorter periods of time.
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