A Guide To Saving And Investing

Sitting down on a Saturday afternoon with an Earl Grey in one hand and the Financial Times in the other, you are about to embark on your journey to financial independence. Suddenly a wrath of political, financial and economic news engulfs you. Incisive expert opinions and market data flood your senses with facts, figures and the next best savings and investment opportunity.youre asking yourself, whats the fad and whats the best choice?

Its difficult to be a smart financial decision maker in todays world, especially when all you want to do is protect the wealth you have and make it grow at a reasonable pace. With an overflow of data assaulting the senses and mystifying even the savviest of smart investors, you now need a professional financial degree to make even the most basic investments and savings decisions. What will you do? Well, a bit of smart advice. go back to basics.

Saving and investing are two related but independent processes that you shouldnt confuse. A disciplined investor could find himself with dozens of real estate rental properties but unable to pay his day to day bills if he didnt appreciate the balancing act between these two foundations of success.

Perhaps the best place to begin is to define the difference between saving and investing.

Saving

This is about putting cold hard cash aside and parking it in extremely safe, liquid (meaning it can be sold or accessed in a very short amount of time, at most a few days) securities or accounts. The highest goal for these funds should be to keep pace with inflation but you should either avoid risk or take on a very low amount of it.

Investing

This is the process of using money or capital (as it is sometimes known) to buy an asset that you think will generate an acceptable return over time, making you wealthier, hopefully, with each passing year. An investment can include anything from a company to fine art, rare wines to gold coins, famous comic books to mutual funds, bonds, stocks and property, to name but a few. It can also include song rights, patents, trademarks, etc. Good investments are the soundest way of growing wealth but can take time, perhaps even years, to work out because we live in an uncertain world.

Save Some, Spend Some And Youll Always Have Some

Saving is your powerhouse. It is the foundations upon which your investment house will be built. Unless you have access to a lottery win or a very rich relative, your savings are what feed your ability to invest.

Make a financial plan, set goals, evaluate your current financial resources and come up with a number of financial strategies, for example, as a general rule, your savings should be sufficient to cover all personal expenses such as mortgage repayments, other loans, insurance and utility bills, food and clothing expenses etc. for at least 6 months. Therefore, if you become unemployed, you are not immediately burdened with the extreme pressures that come from living from pay cheque to pay cheque. If you have an investment goal to achieve in 5 years or less, you should be savings driven, not investment driven.

According to Warren Buffet, the worlds second richest person, if a person has to become a millionaire at the age of 65, then he has to save $10 per day if he is at the age of 25. If he is 35 years old, he must save $22 in a day. If he is at the age of 45, his savings requirement is $55 per day. If he waits until the age of 55, he has to save $182 per day. He assumes the saved amount of money will generate 8% returns per year. This example shows the importance of savings in ones life*.

The moral of this story is start saving as soon as you possibly can, even if its only small.

To Invest Or Not To Invest

If you now pop on your investors cap, you are more willing to risk your pot of accumulated savings, making your money work harder for you i.e. the potential of earning a higher return. Investments, such as stocks, bonds and mutual funds, will fluctuate in value. Strategies, such as diversification (spreading out your investments over a number of different assets and asset classes like equity or fixed income), dont ensure specific returns but can help manage the risks of investing. By spreading your money among different types of assets, you can strive for a comfortable balance of risk and return potential that will meet your needs but, be aware, while you have the potential to earn a lot of money, you also have the potential to lose a lot too. Like anything, get advice from the experts but educate yourself too, so you know what you are getting into.

Be smart! Rather than choosing saving vs. investing, consider combining them. Then you can blend the relative stability of saving with the accumulation potential of investing, as your individual needs dictate.

visual.ly/10-financial-lessons-we-can-learn-warren-buffet

Important Notes:

Please note that this article is not an offer for sale and Generali International Limited is in no way presenting a recommendation of funds/asset classes or suggesting that one fund/asset class is better than another fund/asset class. Generali International does not provide investment advice based on individual circumstances. Investment decisions are the responsibility of the financial adviser and/or investor(s) and any choice of investments is entirely at their own risk.

It is important to note that funds/asset classes that may be mentioned in this article may not be authorised for sale in Hong Kong and/or Singapore and hence not available for offering to investors based in Hong Kong or Singapore. Please refer to the current International Fund Selection Brochure (IFSB) for a list of unit-linked funds available from Generali International Limited (available on request).

The article is for general information only and must not be regarded as an offer or invitation to acquire an interest in or participation in a Generali International product.

You should note that investment involves risks. Past performance is not indicative of future performance. Investors and/or their investment advisers are responsible for their investment decisions and any choice of funds is entirely at their own risk. Please note that investment performance (as well as the income accruing to an investment) may go down as well as up.

Tags. how to invest money, Investing, investments and savings, saving and investing, saving versus investing, savings and investments, savings vs investing, what is investing

Author. Generali Communications Team

Have any questions? Leave a comment below or contact us using the following details:

Europe/Latin America Regional Office: +353 (0)46 906 0206

Far East Regional Office: +852 2526 1899

Middle East/Africa Regional Office: +357 (0)22 661418

Singapore Branch: +65 66729152

About Generali International:

Generali International Limited is part of Assicurazioni Generali S.p.A and, therefore, part of the Generali Group.

The company is a leading international insurance provider with its head office set in Guernsey and

it is an authorised insurer in Hong Kong and operates in the Far East, Latin America, the Middle East and Europe.

Generali International provides modern and flexible insurance-based investment solutions to a global audience, including both international expatriates and certain local resident populations.