Many people confuse the terms saving and investing. To save is to create a reserve of money that is kept at a risk as low as possible, even close to zero, while investing means putting the money saved to work in your favor to increase their value and to help you reach your financial goals more easily.
Savings to be affordable and to conserve their value are usually kept in financial instruments with increased liquidity and low risks, such as bank deposits or treasury bonds, these instruments being characterized by low returns. Earnings of savings are in the form of interest and the aim is to cover at least the inflation rate.
The qim of investments, on the other side, is the achieving of high returns by increasing the value of the invested capital and making profit, assuming an acceptable risk. Thus, the financial instruments used are from the least risky ones, such as bonds with a relatively low risk, medium risk (shares and peer-to-peer lending), and derivatives that have a high degree of risk and which are especially addressed to professional investors.
In short, the purpose of savings is to preserve capital at low risk and low returns, while the purpose of the investments are to increase the value of the capital invested in variable risk and return conditions depending on the financial instruments chosen.
The capital market is a dynamic way to invest the saved money. If you do not have the necessary knowledge to start investing on your own, you can contact a specialist. Before you start investing, you need to go through some essential steps:
– First of all you need to start your financial education. You can not start investing before understanding how the financial markets work and what are the characteristics of the financial instruments you want to invest in;
– You need to know what your risk appetite or maximum risk level is, according to which you will choose the right investments for your risk profile;
– You need to set your investment goals, including the time frame for which you want to invest, in order to create a diversified portfolio that meets your needs;
–And last but not least, you need to determine what liquidity you want, so you can have access to your money when you want it.
Choosing the right investments may seem like a difficult process due to the multitude and variety of available tools, but having a trustworthy partner with you, as it wants to be for you my-passive-income.eu, investments can become accessible to anyone who wants to become an investor .