“Financial peace is not the acquisition of stuff. Its learning to live on less than you make, so you can leave money back and have money to invest. You can’t win until you do this”-Dave Ramsey
You probably have heard and desired to get to a point where your money is working for you. In this review, a sure way to get this is by investing your savings. To start with, let’s define savings and investing. Saving is setting aside cash usually regularly and keeping it in a savings account. On the other hand, investing is taking your savings and putting it in vehicles that will make it grow.
Look at it this way; your savings should be viewed as ‘seed’ that can be planted to earn a hundred more and replanted again to make a thousand more. To get more clarity, you need to know the smart ways to invest your savings. Saving alone is not enough, as this won’t take care of inflation. Without a doubt, inflation is inevitable.
As discussed below, the following three ways would be good soil to put your seed for growth.
1. Money market fund
This is a mutual fund where your money is invested in highly liquid portfolios with a short-term maturity. For this reason, they are highly liquid and attract shallow risk. The fund is managed by a mutual fund manager who oversees the investment decisions. All this is governed by investment policy. Meaning, before you engage in any, know the terms of engagement.
Unit trusts hold substantial amounts of liquid assets, especially bank deposits, underlining their commitment to buying back units on demand and readiness to invest in new assets if and when available at attractive prices. If you are a beginner to investing, you will most likely do better by putting your money into a unit trust than in single stocks.
2. Treasury bill and bonds
When you buy a bond, you are merely giving a loan to the government or a firm, usually for a defined period. Bonds are considered safe as there is a guaranteed rate of return, which is predetermined, from the firm or country that you have given a loan. However, their rates of return are lower compared to that of shares.
While bonds can be reach maturity between 5-30 years, treasury bills are short-term. While the government is assured of cash to finance particular projects, you as the individual are assured of getting your money back in full. Admittedly, it’s one of the smart ways to invest your savings.
3. Stock market
The stock market is where equities of various listed companies are sold. By buying shares of a particular company, you own part of that firm. To do this, you should be directed by the proper financial analysis, which will enlighten you on a firm’s strength. Additionally, look at the valuation of the firm to help you know whether you are paying one dollar or three dollars for a firm worth two dollars.
Importantly, by buying shares, you are set to benefit from firms well managed. Furthermore, there are good returns on investments. Similarly, stocks are reasonably liquid, thus disposing of them takes a short time.
When a company records a profit, it shares part of the profit with the shareholder. The sharing is done based on the number of shares you hold. When the value of this company goes up, the price of the shares goes up as well. This means you can sell these shares at a higher price, making a profit.
With all the information available, you are better off with an investment checklist. Alternatively, information overload will bog you down. However, besides investment been seen as a growth platform, losses can occur. This means there is a risk of losing.
Remember, in the investment world; you will need to come out of your comfort zone to experience significant gains. Do so step by step, and be ready for ups and downs.