Knowing what to do with money is one of the most important things we must do. Unless we do this properly, money won’t simply be there or work for us without input. We must put in the necessary work, time and planning before deciding where to place our money. Broadly speaking, there are two directions we can take: saving or investments.
What is the difference between saving and investing?
As Personal Finance by the Book notes, there are significant differences between saving and investing.
“Savings are low risk funds that must be liquid (available) when you need them. The purpose of saving money is so you can have it for a specific purpose within a short time frame.”
Investments serve a different purpose. These we utilise for wealth building and aren’t, for example, emergency funds we can access at anytime. They involve more risk but also provide greater rewards. The richest people in the world became that way most likely due to smart and lucky investing.
Investment tips for South Africans
Every country has its own issues when it comes to dealing with the stock market. This means what might work in America might not work in South Africa. However, sometimes there are overarching perspectives from which anyone can benefit.
The first step to anyone considering their investments is to speak with professionals. Brokers can provide greater insight into how best to use our money, but that doesn’t mean their word is gold. Nonetheless, experts have been speaking about what people can do to help their investments.
For example, finance expert Warren Ingram pointed out the markets are extremely unsettled at the moment. With international events like the American Presidential election and the recent “Brexit” move in the UK, people are scrutinising their options more carefully than ever. Says Ingram:
“When global and local markets are so volatile, investors would do well to keep their portfolios highly diversified across a range of asset classes and international markets.”
By this, Ingram means we must not only invest in one kind of option or stock. We should consider many. As the saying goes, we don’t want to put all our eggs in one basket.
Importantly, we must not think of investments in South Africa like gambling – investments aren’t purely about luck, but smart interventions and consideration of our options. Gambling is entirely luck-based and no amount of research will tell us how to get the dice to land in our favour.
Other ways we can do well is to start saving and investing early. This allows time to do a lot of the work for us. Young people have time on their side and should use this to their advantage.