The lowdown on saving versus investing

Whether you are in it for a quick buck, or taking a look at your finances over the long term, Umhlali-based The Robert Group’s Devin Shutte points out investing and saving are not one and the same.

“Perhaps you would like to plan for your retirement, buy a car, or put down a deposit on a home. This is where investment comes in,” said Shutte.

“But if you are simply putting some money away for a rainy day, school fees, car tyres and maybe a small holiday – consider savings options.

“Savings are generally made through a savings account with your bank, which should yield returns roughly in line with inflation. Money left in a savings account over the long term will not grow in real terms, or rather at a faster pace than inflation.

“As a result of the longer time investments are geared towards, an investor is able to take on more risk in the hope of potentially earning higher returns,” Shutte said.

One could invest in cars and products for example, which exposes an investor to a combination of asset classes.

Direct investments can also be made in equities, bonds, property and the like.

Depending on the scope of the investment, one would expect an investment to grow faster than inflation over the long term, generating higher returns as opposed to savings.”

There are risks associated with both savings and investments, however.

Shutte said people should familiarise themselves with the risk they adopt with either investment or savings options, and whether these risks would be worth the potential return.

“How much risk one is prepared to take is a personal choice, and depends on how comfortable you are with volatility, and what your financial goals are.”

Any experienced financial advisor would be able to guide a person on the matter, but there are some points to consider:
• There is always a degree of risk when saving or investing. Understand how much you are taking on compared to your actual risk tolerance.
• When saving or investing long term, consider an investment that will actually see growth against inflation.
• If it sounds too good to be true, it probably is.
• Engage with product providers who are regulated and licensed to provide financial products.
• If you do not understand a product, seek the advice of a professional.

Speaking of risk, Shutte said the country was recently grey-listed by the international organisation, Financial Action Task Force.

This was owing to shortcomings in the country’s anti-money laundering processes, while financing terrorism is also a criteria.

“While not as negative to the economy as a credit downgrade, being grey-listed means we will come under additional scrutiny when doing business with other countries,” he said.

“This will include an additional level of compliance and administration being placed on us, as transactions with South African companies will be viewed as higher risk. While we can move off this quite quickly, grey-listing adds a burden and expense to doing offshore business that was avoidable.”

Follow The North Coast Courier on Facebook, Twitter, Instagram & YouTube for breaking news

Telegram Broadcast Service: https://t.me/joinchat/yJULuN8NaCs5OGM0