Saving or investing?
With the historically low savings interest, more and more people are looking at the possibility of making money with investing. In this article we look at the possibilities for investing and we also look at the advantages and disadvantages of both saving and investing; that way you can make an informed decision to start saving or investing.
Saving: the advantages and disadvantages
Many English people save their money: they do this mainly because this is a relatively safe way to store money and thanks to the interest you receive something in return. However, when the interest rate is very low, your capital is worth less. The inflation – the rate at which prices rise – is actually higher than the interest you receive on your savings balances.
A big advantage of saving is that the costs are low. Opening a savings account is usually free and you do not pay any extra administration costs. Due to the government deposit guarantee scheme, your savings only run a limited risk. Only if you deposit more than £100,000 at one bank do you run the risk of losing any of this money.
Nevertheless, more and more Dutch people are choosing to invest part of their capital: with a negative return, you are actually a thief of your own wallet when you start saving. But what are the advantages and disadvantages of investing?
Investing: the advantages and disadvantages
Many people think that there is only one way to invest: you put money into a fund and when it goes well you earn a lot of money, and when it goes poorly you lose all your money. It is true that investing has greater risks, but investing always yields more money than saving over a longer period of time.
It is also possible to reduce these risks. For example, it makes sense to spread your money over various investment methods. It is possible, for example, to invest part of it directly in stocks, to have part invested by an investment fund and to invest part of it in relatively safe bonds. By also spreading your risk over various regional zones and time periods, you can significantly reduce the risks, making it attractive to invest at least part of your money.
Wise & lucrative investing
The question of whether you should be saving or investing is actually formulated incorrectly; the question should be whether you should be saving and investing. To this question my answer is definitely a resounding YES! An interesting way to invest for beginners is to use an online broker. With an online broker you can choose which stocks, commodities and currencies you buy.
It gets even better. With online brokers it is also possible to earn money in a declining market. Therefore it is a myth that you can only earn money when stock market prices are rising. For example, you can go short on a stock and in that case you earn money for every pound that the price drops.
In addition to investing yourself, it may also be wise to put a part of your money into a fund. Funds are often mainly attractive in the long term. You can then save for a larger purpose such as a car or your pension. All in all, it is therefore most attractive to save and invest and to make use of various investment methods when investing.