People work hard, spend hard and save a bit which is best in today’s day and age and if small amounts of savings are maintained in a disciplined way, it can amount to quite a total. We all can save money with a bit of self restraint, but the real question is how we can make our savings go the extra mile.
Most of the high street Banks and Building Societies are not the best deals for your money in terms interest rates and deals on fixed deposit saving rates. It is important to put some research into which bank or financial Institutions provide the best deals that suit your needs. This can be base for all your investments. Before investing it is necessary that there is a back up, emergency fund that will allow you to stabilize the flow of your money this generally consists of an amount that can sustain you for three months in a situation where you might lose your job or any other emergency.
There are many options for investing your money, what needs to be looked at is the risk to benefit ratio which can also be demonstrated by the lottery for which $1 or 1 may be paid and 20million could be won in either currency the chance to win is 1out of a millionth thus the risk is very high and will more than likely result in a loss. On the other hand if dealing in shares the risk is far lower than the lottery and the benefits are hugely lower as well thus more is invested to get a reasonable profit. Same is the case with saving accounts with the banks the risk is low so the return is low.
The trick is to manage risk in order to keep stability (maintaining a living standard) and at same time look to get a good return on your money, which means diversifying saving in regards to risk. Most people have their own way of planning out their own investments. Some people are more risky and others are more risk aversive. Generally the older a person is, the less the risk they take or the younger the person is the more they are willing to take on risks. This has to do with health as old people need money available in case of a health emergency, whereas the chances of having a heart attack at the age of 26 are hugely lower.
There has been a formula driven for how much of a person’s saving should be risked in regards to age in order to get greater returns, which is
100-Your Age= Percentage of Savings to be invested into a reasonably higher risk investments
An example would be of some one who is 21years old 100-21=79% which means a person at the age of 21 should roughly invest 79% of their savings into more risky investments to get more of a return. This is no hard and fast rule, but only a guide line.
If someone is entirely new to investing they should try and read up on magazines, web sites, or different offers because everything is out there to give you a high return on their money. It is to good idea to start off with broad based mutual funds and look around the subject, as mutual funds provide market exposure with less of a risk, although the returns are cut as the funds need to make a profit as well.
Hope you have a better understanding of how to invest your money in long term from this article.