Using Investment to Supplement Savings
Using investment to supplement savings is becoming more
widespread. With the world becoming more and more unsure these
days, it seems that many more people are interested in building
a personal savings to ensure that they have a safety net to
protect them should hard times come. For many, wise investments
become a major part of this savings safety net... after all,
many investments have the ability to yield much more profits
than the interest that is accrued from basic savings.
The risk associated with some investments makes many people
hesitant to commit their financial futures to them, though. In
most cases, however, investment can be a relatively safe and
trustworthy way of supplementing basic savings, and smart
investment practices combined with patience can reduce most of
the risks associated with investing.
A Look at Investments
As a basic definition, investment can be looked at as purchasing
something that will hopefully be worth more in the future than
what was paid for it. The "something" that is purchased can be
something physical, like a collectible or precious metals, or
something without a real physical form, like stocks or bonds
which may be represented in a physical way by certificates but
don't have a physical manifestation themselves.
Investments that are made to supplement savings use this
purchase as a way of setting money aside for later, in the hopes
that when the time comes to sell that the value will have
increased significantly.
A variety of different types of investments exist, some of which
are designed for short term use and others for long term.
Short Term vs. Long Term Investment
The main difference between short term and long term investment
is that short term investments are expected to last only for
weeks or months, whereas long term investing is expected to last
for years. In most cases long term investments will be used with
savings more than short term for the simple fact that savings is
considered to be a long term idea.
Short term investments can be used with savings, however,
especially in cases where the investment is only available for a
limited time and a portion of savings is used to invest.
Long term investing is generally done separately from savings,
supplementing the money that is saved instead of augmenting it
directly.
More types of investments tend to be long term than short term,
at least in part to the ability for investment items to continue
rising in value as time goes by.
Common Types of Investments
Obviously, a large variety of investments exist... to compile a
complete list of investment types would be nearly impossible.
Instead, here are some of the most common types of investments
that you might wish to use to supplement your savings plans.
First are the two most common investment types, stocks and
bonds. Stocks are portions of ownership in companies and
businesses, whereas bonds are investments in government-issued
certificates.
There are several other types of investments which are traded
along with stocks and bonds, such as futures (speculation on the
future performance of commodities), indexes (groupings of
commodities and traded items), and sectors broad groupings of
industries.
All of these types of investments are traded on the stock
market; there are, of course, other types of investments that
aren't.
These include private collections (such as rare dolls, stamps,
coins, or other items), precious metals (usually presented in
bars or coins), and even foreign currencies which are exchanged
at one rate, and then exchanged back after values have increased.
Still other forms of investment exist, but they tend to get much
more complicated than the scope of this article.
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