The entire planet seemed to be in disarray. In the middle of a global pandemic, lawlessness took on new meaning in South Africa as looters left a trail of damage in their wake and local law enforcement stood helpless. People are starting to think more carefully about the future with regards to their investments and savings as they take stock of how to ensure they can provide for their families as the local economy appears to be teetering on the edge of a precipice.
What's my recommendation? Investing. There's a distinction to be made between savings and investments. Saving is the process of putting money aside that you do not require right now, usually in a bank account. There is little to no danger. Although profits are typically lower, the advantage is that your money can be retrieved right away.
Investing, on the other hand, is the process of buying assets like stocks, unit trusts, or real estate with the goal of making a profit. Investments are meant to assist you in achieving your long-term financial objectives. By putting your money to work for you, they can assist you in generating and maintaining wealth.
Why should you invest?
Long-term reward potential
Investments provide you more chances to expand your money. It's a good idea to hire a financial advisor who can help you decide where to invest and monitor your portfolio. The stock market is volatile, which means it can move a lot in a short period of time. This is advantageous for long-term investing because your financial advisor will keep an eye on the market and trends. They'll be able to point you in the direction of an investment that not only fits your risk tolerance but also helps you get the best return on your money. All you have to do is approve or reject their suggestions.
Savings must generate a rate of return after taxes that is higher than the rate of inflation in order to grow in real terms over time. Savings accounts typically pay very little interest, making this difficult to obtain. Take, for example, the purchase of bread, milk, and eggs. Right now, this will set you back roughly R80. If you deposit R80 into your savings account, you will have little more than R80 in your account after a year. However, due to rising inflation, the identical items will now set you back R89. As a result, you've essentially lost money. In comparison, if you had put R80 into property or unit trusts, you would have grown your money. That means you'll have more than R80 in your account depending on the growth rate of your investment.
Possible regular income
If you've recently retired or are soon to retire, you're probably concerned about your daily expenses. Stocks, bonds, and real estate are examples of investments that can offer you with a constant and predictable source of income that is often higher than inflation to cover your day-to-day costs. Speak with your financial advisor about these types of investments and begin the process of ensuring your future.
Investing can be tailored to your needs
You can create your investment portfolio with the help of your financial advisor to accomplish various goals at different times of your life. As you get older, for example, you may wish to choose less risky options. With good preparation, you may then alter your portfolio to suit your changing aims and priorities. If you're looking for a long-term investment, look at funds with high growth potential, riskier sectors like emerging markets, or private equity, which can endure short-term market changes. If you're approaching retirement, you should consider putting your money into additional income-producing investments.
Investing should not be a stressful experience. You may sleep soundly at night knowing that your money is working for you. Not only can investing help you protect your future in the long run, but it can also help you start planning that dream vacation you've always wanted to take but didn't think you could afford. Alternatively, you might pay off your automobile or home debt sooner. Alternatively, start putting money aside to pay for your child's university education.
It's never too soon – or too late – to start. Consult your financial advisor and begin investing right away.
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