People often mistakenly think of savings and investing as being synonymous, or as different words for the same thing.
The fact is that we should differentiate between the two and make conscious effort to address both aspects in managing our finances.
Savings is putting money aside for an expected or contingent expenditure. This may be money reserved for the next six mortgage repayments, or money to standby for a medical emergency; basically the certainty that money is available when it is needed becomes important. Critical factors are safety and liquidity (i.e. ease of converting into cash) in order that cash flow problems would not arise. In reality, the safety factor no longer exists when bank interest rates are persistently lower than the inflation rate, like what we are experiencing these days. While the amount of money can be preserved, its value (i.e. purchasing power) will decline over time.
Investing, on the other hand, is focused on growing your wealth rather than just maintaining value. To grow and accumulate wealth, you would need to acquire assets that are expected to appreciate in value over time. These expectations, however, are mere expectations. There is no certainty that the expectations would materialize, and that is the risk that you as an investor must be prepared to take on. The level of risk would typically commensurate with the level of return expected; the higher the reward desired, the higher the risk is required, which in turn, corresponds to the type of asset. A critical success factor is managing investment risk at an appropriate level through proper allocation of different asset classes. Another factor is the ability to respond appropriately to the changing conditions in the financial markets.
This is where professional would help to guide you in making good investment decisions, not just once, but on an ongoing basis.
Lal & Partners is licensed to advise and transact in insurance products and unit trust funds. Before advising you on the appropriate products to invest, we would take into account your personal and financial situations at the present time as well as your goals and objectives for the future. Our aim is to do what is best for you; your interest is paramount. Our desire is to maintain a long lasting partnership that is rewarding for both you and us.
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