|
|
|
|
What's the difference between
saving and investing?
Saving is a stage on the way to investing. You cannot be
an investor without being a saver but you can be a saver
without being an investor. Savings are effectively cash or
cash instruments, such as deposit account, term bonds etc.
Investing is what you do with the savings you have created
if you are looking to generate a return on your money that
is greater than what is already available to you through
your savings instruments.
Is my money safe?
There is really no such thing as 100% safe saving scheme
or investment scheme. If anybody tells you different, dont
believe them! Not even government-backed bonds are 100%
safe.For that matter, ask anybody who had money invested
in various Latin America debt instruments in the 1970s and
1980s. Even governments can go out of business!.
Is investing all about my attitude to risk?
In large part, yes; the more attractive the potential rate
of return on offer, the bigger the risk to the capital
that you invest. That applies across the whole spectrum of
savings and investing vehicles, from deposit accounts to
shares. How much you should invest and what you invest it
in will depend on three key factors: your attitude to
risk; the level of return you want to achieve; and how
long you are prepared to invest your money.
If you are, for example, close to retirement you wont want
to take too many risks with your money. On the other hand,
if you have few commitments and are several years away
from retiring, you may be prepared to take a punt and
invest in something with a high risk in the hope of
getting a high return. If you want to aim for a higher
level of return but still with a relatively low risk
element, then you should be prepared to tie your funds up
for some time. Most forms of investment offer greater
potential returns for those prepared to invest for the
long-term, although this isn't guaranteed.
Broadly speaking, we may place most forms of savings and
investments into a risk spectrum with derivatives at the
speculative end and Gilts and National Savings &
Investments at the very low risk end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bank/Building Society Accounts |
|
|
|
| Gilts/National Savings &
Investments |
|
|
|
|
Should I
be investing in the stock market?
The answer to this question is a definite yes. It has been
seen that over the years there has been no financial
instrument which has given returns as high as the stock
markets. The only important factor to be kept in mind is that
investment should always be made with an objective in mind and
we should not be too greedy while investing. On the other hand
,as inflation has fallen over the last couple of decades so
have the returns available from basic savings accounts. In
fact, many instant access accounts no longer keep pace with
inflation at all. Leaving your money in such an account now
actually means it is falling in value!
What is the next step after investment?
Review your financial position fortnightly. Are you making the
best of the money you save and invest? Re-evaluate your
portfolio. Are your short-term investment giving you the
desired rate of return or are you trapped by buying the stock
at its peak? Book losses on these shares and try to invest in
shares where you can make up for the losses.
In case of long term investment track news on the stocks
regularly. If there is a change in business environment,
management or future profitability the valuation of stocks
will change accordingly, and hence the target price will also
change.
Take a long careful look at how your existing savings and
investments are performing. Are you happy that you are getting
the best possible return from them? Do they fit in with your
current "risk profile" - should you, if you are getting closer
to retirement, be thinking about reducing the level of risk in
your portfolio of investments or should you actually be
thinking about taking a few more risks if you have plenty of
time in which to build up an investment. |
|
|
|
|
|
|
|
|
|
|
