Damon Harris 2016-02-06 02:31:58
Financially speaking, the terms "saving" and "investing" are often used interchangeably. But the concepts behind these terms actually have some important differences. Understanding these differences and taking advantage of them may help you in working toward financial goals for you and your family. Saving You may want to set aside money for a specific, identifiable expense. You park this money someplace relatively safe and liquid so you can get the amount you want when you need it. "Savings are usually put into the safest places, or products, that allow you access to your money at any time. Savings products include savings accounts, checking accounts, and certificates of deposit. Savings instruments generally earn interest. However, the likely trade off for liquidity and security is typically lower returns. InveSting While a return of your money may be an important objective, your goal might be to realize a return on your money. Using your money to buy assets with the objective of receiving a profit or gain is generally referred to as investing. Think of investing as putting your money to work for you--in return for a potentially higher return, you accept a greater degree of risk. With investing, you don't know whether or when you'll realize a gain. The money you invest usually is Not federally insured. You could lose the amount you've invested (e.g., your principal), but you also have the opportunity to earn more money, when compared to typical savings vehicles today. The investment is often held for a longer period of time to allow for growth. It is important to note, that multiple investment vehicles exist and some involve risk, including the loss of principal. It’s important to understand your risk tolerance before investing. What’s the difference? Whether you prefer to use the word "saving" or "investing" isn't as important as understanding how the underlying concepts fit into your financial strategy. When it comes to targeting short-term financial goals (e.g., making a major purchase in the next three years), you may opt to save. For example, you might set money aside (i.e., save) to create and maintain an emergency fund to pay regular monthly expenses in the event that you lose your job or become disabled, or for short-term objectives like buying a car or paying for a family vacation. You might consider putting this money in a vehicle that's stable and liquid. Think of what would happen if you were to rely on investments that suddenly lost value shortly before you needed the funds for your purchase or expense. Saving generally may not be the answer for longer-term goals. One of the primary reasons is inflation--while your principal may be stable, it might be losing purchasing power. Instead, you may opt to purchase investments to try to accumulate enough to pay for large future expenses such as your health care, child's college or your retirement. Generally, saving and investing work hand in hand. Why is it important? Both saving and investing have a role in your overall financial strategy. The key is to balance your saving and investing with your short- and long-term goals and objectives. Overemphasize saving and you might not achieve the return you need to pursue your long-term goals. Ignore saving and you increase the risk of not being able to meet your short-term objectives and expenses. Determining the appropriate mix for you and potentially increase your chances of staying on plan. Looking for advice, a second opinion or simply never planned, I can help! As a LPL Financial Planner, my personal goal and commitment is to spread the word of financial literacy and to assist you through the process of developing, implementing and pursuing your financial goals. My passion and commitment to my client’s satisfaction is the driving force that powers me to excel. I hold myself accountable to the highest standards, while staying true to my personal values (family, honesty, integrity & respect) to ensure strong, long lasting client relationships. Please visit my company website at www.rivcowealth.com to learn more, or take advantage of my open door policy and call me directly at 951-638-4015. CA Insurance Lic# 0E00627 Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Damon Harris is a registered representative with, and securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC
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