Photography: Racorn
Investing is more than just savings. In the parlance of finance, savings isn't about not spending all your earnings. It's actually about putting aside some of your hard earned money to meet your financial needs in the short term. You can put aside some of your money either in cash under our pillow; or more often it is kept in a savings account with a bank. But cash or savings account earns almost nothing, or very little, and is unlikely to protect you against inflation and it will make your idle money worth less over the time, potentially making you suffer from loss of purchasing power.
Investing, however, is about putting your money away in a venture or asset that will make you money from the sale of the venture or asset. The profits earned should exceed the inflation rate over the period of the investment so as to increase your personal net worth and allowing you to create the wealth to achieve your lifestyle goals. Your dream house, the sweet rides in your garage, your children's education, healthcare insurance, annual vacations, the monthly romantic dinners, the club fees, and the early retirement where you live comfortably, investing in something can bring you there. Let your money work for you and give you earnings and profits that exceed inflation. However, investing is not without risks. When there is a potential gain, there is also potential loss. You can mitigate the risk of loss through following these four very simple rules:
1. Invest early in life. The longer time you have on your horizon, the better chance your investment can overcome the volatility of asset prices, or for the venture to generate profits.
2. Don't put all your eggs in one basket. Spread the risk by investing in different classes of assets. You are likely to lose an egg but not all your eggs if you have a portfolio of investments.
3. Understand the risks of your investment. Buy only when you have understood all the risks in your investment. Don't be lured into a promise of high gains when you should also understand the risk. High gains equals to high risk of loss just as lower risk provides lower gain.
4. Understand your own risk tolerance. Your appetite for taking risk of loss and managing the potential gain in the investment changes over time and over circumstances in your life. So, review your risk appetite regularly and adjust your investment portfolio.
When you are entering the married life, or already in a marriage, and you're looking to invest, discuss the matter thoroughly and openly with your spouse. Be open with the things you want to invest in and make sure that both parties are comfortable with the investment portfolios. Have fun choosing the perfect investment and enjoy the advantages!
