There are many reasons to save but the main one is to provide you and your family or business with a ‘rainy day’ fund in order to meet future financial liabilities. These future liabilities may not even be known to you right now. However, the peace of mind of knowing you have the ability to meet likely or possible future expenditures is a valuable one.
There two main ways to invest for the future:
- Invest a lump sum that you have now
- Invest a little every month in order to build up a lump sum
If you have a lump sum to invest, you may require capital security or perhaps you are willing to forgo security in order to make a higher return on your capital.
If you plan to invest something every month, you may not wish to take any risk on your way to achieving your goal of having a lump sum. Or you may be willing to take some investment risk in your monthly plan knowing that you can avail of ‘euro cost averaging’ over the long term in this manner. This means that you may buy assets at a variety of prices (since buying monthly) over the long term and investment volatility is welcome as you can buy when asset prices are falling as well as rising and benefit from long term average returns.
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