21 January 2022
Investing comes in many different forms, and they all have the potential to make you a lot more money than a simple savings account. Investing gives you the ability to make more money in a shorter period of time than savings. You are also able to adjust the risk factor yourself. The higher the risk the more you could earn. Although, a lot of risk is not for everyone, especially if you are playing with your life savings. However, investing is a great way to protect your finances and create more wealth for you and your family.
Diverse Investments will Protect Against Changes in the Market
If your currency depreciates over time, you will lose out if you only have a savings account at home. However, investments can be spread across a wide range of areas and can come in many forms. That means if any particular area loses value, you will not lose everything. Diversifying your investments is a must-do for this very reason, and even having some money in a savings account is also a good thing. Diversifying basically means you are mitigating risk and avoiding any depreciation in currency value. These days you can invest anywhere, so it may be an idea to invest at home and abroad in emerging markets, online and in real life, as well as in more secure markets, for example. That way, any change at home will not affect the money abroad, and vice versa.
Protects Against Inflation
Generally speaking, inflation rises faster than interest in a saving account. So, that means that the money you have saved is worth far less than it was even a year ago in some cases. However, investments are not limited in the same way. They work on market value and can rise far more quickly, outpacing inflation in many cases. There are so many types of investment such as stock and shares, property, collectibles, etc., and get it right and mitigate risk, and you may well have a lot more at the end than you would with a mere saving account. By doing this, you have protected the value of the money in real terms, according to the cost of living and living standards.
Investing in itself is a form of insurance if you have diversified and mitigated the risk factor. If a huge economic downturn happens but you have properties, for example, you will have something to fall back on. Insurance in itself is a form of investment too. Taking out insurance on your home, for example, will protect it in the event of a fire. You can also take out insurance on your wages, income protection insurance too. Insurance in all its forms buys you time and reduces stress in times of upheaval. Say you have been injured and can no longer work. Well, income protection will mean you do not lose out financially as a result of losing your job. It will buy you time to make good decisions and let a personal injury attorney help, for example.