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Why investing your spare money can be a far better idea than saving

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We are certainly living in uncertain times when it comes to long term strategies for personal finance. Analysts often tell us how important it is for working age people to be making adequate provisions for their retirement, but with the economy over the last decade being volatile and concerns about potential future financial issues like the student debt crisis, it can be difficult to know for sure that the strategies you have chosen will withstand whatever the next few decades may bring.

moneyFor many of us, the easiest approach can simply be to leave money in a savings account, and add to it when we can. While this is certainly simple, it isn’t usually the way to get the most out of the potential of your capital. Instead of letting your bank choose how to invest your money and reward you only with the standard rate of interest, you could get a lot of advantages from doing some research and making your own investments.

Here are some of the reasons why investing is better than leaving your money alone in a savings account:

You Can React to Economic Changes

One of the best things about investing is that you can actually respond to the changes that happen over time and adapt your strategies. In business and in economies in general, certain trends come and go, and this means that while social media companies may be a good investment one year, this may not be the case for the next thirty years. Even without being an expert on the markets, you’ll know when some things are on the rise, for instance green energy, and when others look to be fading in popularity and therefore profitability. Would you rather look back and say that you made the most of the booms that came during your working life? If so, an investment portfolio is a good idea – though of course, you will want to be managing the portfolio over time, rather than simply picking what works right now and forgetting about it.

Investing Is Simply More Interesting!

Saving money is a fairly passive thing, once you have an account. You simply leave the money there, and when you can afford it, add to the pile. Aside from watching the pile grow, there isn’t really much else of interest going on. Investing, however, is active and engaging, and can give you a real sense of satisfaction when you make an especially good choice. There are all kinds of things you can invest in, from looking at real estate markets without buying properties yourself using REIT investment, through to stocks and shares, commodities, and other funds. If you want to, you can even invest in businesses you believe in and help them out while also potentially helping your capital grow.  However you choose to do it, having investments to follow and care about is just more fun than putting your savings away in one account for tens of years!

Less Temptation to Dip into Your Savings!

A lot of people find saving difficult, because the money in a savings account can often be accessed very easily to use for other things. When you invest money, it is still normally possible to free the capital up quite quickly (almost instantly in some cases, for instance by selling shares), however there is a bigger psychological barrier to doing this and removing money from a good investment rather than withdrawing it from an account. This is often enough to make you question whether it really is a time when you need to dip into your savings, or whether you can live without the thing you want to buy or fund it in another way.

For some people, this actually helps them stick to their saving plan much more easily, and not end up back at square one having used up the money they saved on something that wasn’t really an emergency. Of course, with investment you may actually be making a good profit on top of your original investment, for example earning dividends, and it is up to you whether you use these as additional income or reinvest them. This can mean that times when you consider dipping into the original capital are far rarer anyway.

As you can see, there are some very good arguments for learning to invest, so why not start researching or talk to an advisor about beginning your own investment strategy today?

Contributors

Contributors

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