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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