Managing our finances through saving and investing is a crucial aspect of our lives. Saving means putting away money for later use in a secure place for a rainy day, such as a bank account. Investing means taking some risk and buying assets that will increase in value and provide you with more money than you put in over the long term.
Saving involves putting money aside for future purposes, such as a vacation, a new car, or an emergency fund for unexpected expenses like significant car repairs or a new roof. Typically, savings are accumulated in highly liquid and secure accounts, such as bank accounts, where the risk is minimal.
Saving is ideal for short-term goals. However, simple savings accounts often come with low-interest rates, so you will likely see little growth in your money over time, especially when considering inflation.
Investing involves buying an asset, like a share in a company, a unit in a mutual fund, or a rental property whose value you anticipate will increase over time.
Unlike saving, investing puts your money to work with the aim of increasing the overall value of your investments. There are inherent risks that may cause the investments to fall in value, which is why it is important to understand the risks embedded in your investments.
Investing is ideal for longer-term goals such as planning for retirement or saving to pay for a child’s college education. The longer your investment horizon, the more risk you can afford because you have more time to recover if an investment doesn’t perform as expected.
Striking a Balance: How to Incorporate Both Savings and Investments in your Financial Plan
Ensuring sufficient rainy-day savings and long-term investments is important to achieve financial security. Your first step should always be to set up an emergency fund in a high-yield savings account. Covering unexpected expenses, such as home or car repairs, will help you avoid dipping into your investments or going into debt.
When you have reached your desired savings level, allocating money to investments that align with your long-term financial goals should help you grow your wealth faster. Longer-term investments can include traditional investments like publicly traded stocks, bonds, and mutual funds. Private investments, such as private real estate funds, offer the benefits of direct real estate ownership without the hassle of being a landlord. Diversifying your portfolio with different asset classes, as well as both public and private investments, should help you reduce your investments’ overall volatility, provide some downside protection when public markets are in turmoil and potentially increase your overall returns.
Growing your Wealth with Equiton
Equiton provides a range of private real estate investment opportunities. For instance, Equiton’s Apartment Fund, presents a reliable source of monthly income and capital appreciation. Conversely, real estate development projects offer the potential for substantial capital appreciation over a three to five-year holding period.
Contact one of Equiton’s investment specialists who can assist you in learning more about the benefits of investing in private real estate and how best to incorporate private real estate investments into your current investment portfolio to enhance your financial future.