Investing For Your Future
Saving is typically done for emergency funds and short-term goals and usually has a known, but generally low, rate of return. Investing is done for long-term goals and capital appreciation (growth) of money over time and has a higher potential rate of return. What saving and investing both have in common is that savers/investors must “live below their means” and set money aside today to have available in the future.
People invest money for a variety of reasons including:
To achieve financial goals (e.g., a new car and the purchase of a home)
To increase current income (from dividends, interest, and capital gains)
To achieve financial independence and have funds available for retirement
There is no such thing as a “perfect” (risk-free, tax-free, high return) investment. All investments involve trade-offs and some type of risk. In addition, investors cannot expect to have characteristics of savings (e.g., predictable returns) in an investment product. However, if investors teach themselves to recognize and evaluate investment risks, they will be better able to balance their investment objectives and risk tolerance.
Need more information about investing? Check out the Cooperative Extension basic investing home study course, Investing For Your Future.