Why invest your money?

When you get paid or come into some money, you might not want to spend all the cash. The decision then is whether to save or invest it. Here, True Potential Investor details when and why to invest money for your benefit …

Understanding the difference between saving money and investing money

Let’s begin by explaining how saving money and investing money differ from one another.

When you save money, you are putting the cash aside— usually into low risk cash products like a bank or building society’s savings account. People often decide to save because they want to be able to afford something specific, such as a holiday or new car. Saving can also give people peace of mind if they have a ‘rainy day fund’ to cover the cost of an emergency, such as their home’s boiler breaking or their car failing its MOT.

When you invest money, if you are prepared to accept greater risk you are taking some of your cash and attempting to make it grow by purchasing things that you feel will increase in value over time. You might invest in stocks, for instance, or shares in a fund. Property is another potential investment too.

Why invest money when you have medium- and long-term goals?

For smaller, short-term goals, saving could be the way to go. This is because investments require time to grow. We believe you should plan to invest for three to five years as a minimum.

If you have medium-term goals and are willing to take some risk with your money, then you should consider investing. Particularly appealing when your needs are more flexible, investing money does involve taking a bit of a chance with your original capital but with the potential opportunity to achieve a greater return on your investment than you would get if just solely saving your cash.

Investing money is definitely worth considering when you have longer-term goals. For one thing, inflation can seriously affect the value of cash savings over the long-term. What’s more, the stock market tends to do better than money across a long period of time. This gives you an opportunity to achieve greater potential returns on any cash that is invested over a sustained length of time.

Ready to invest your money? Invest in one of our Fully-Managed Investment Portfolios in a stocks and shares ISA and you will no longer have to put up with low returns on cash savings and Cash ISAs. Instead, you can make your 2018/19 £20,000 tax-free allowance do more — subject to greater risks.

Sources

https://www.moneyadviceservice.org.uk/en/articles/should-i-save-or-invest

https://www.allbusiness.com/top-10-reasons-to-invest-money-93916-1.html