What is more profitable: saving or investing my money?
Posted: Wed Dec 11, 2024 10:09 am
Should I save or invest my money? Until recently, this question, one of the most frequently asked by savers, did not make much sense. Thus, with deposits at 0%, accounts full of commissions and the stock market breaking new records, each session made no sense. In fact, the number of fundraising by asset managers and banks broke all records.
But as is often the case with everything in life, that would not last forever. Thus, June 15 would be a historic day for the world economy and the markets. The Federal Reserve (Fed) approved a 75 basis point increase in interest rates. The decision was momentous for two reasons: first, because it was the largest since 1994. Second, because it was definitive proof that the era of free money was over.
Table of Contents
What does the aggressive US rate hike mean?
Should I save or invest my money?
The profitability of long-term equities is unbeatable
Bear markets, the best time to invest
The importance of investing periodically
Platforms like inbestMe help you maximize your investments
What does the aggressive US rate hike mean?
And so, almost overnight, the eternal question for investors and savers became correct again. After all, as the Fed raises interest rates, it puts a higher price on its dollars, and a cascading effect is produced in the rest of the world. The reason is that as the US currency is more expensive, the rest of the world's currencies depreciate, because the rest of the world's central banks are forced to raise rates as well.
But it is even worse, since not only has there been one increase, in June, but there have been more in the following months, which has put more pressure on central bankers. Thus, for example, up to 33 of the 38 most important central banks have raised interest rates in recent months. In Europe, for example, the European Central Bank (ECB) has raised them on two occasions.
The consequences of this sequence of actions are quite visible: firstly, the cost of borrowing and credit has skyrocketed. Secondly, banks have begun to remunerate, albeit timidly, the deposits spam phone number data of savers. Finally, the equity and bond markets have fallen sharply. Therefore, the eternal dilemma of whether to save or invest my money? has returned with a vengeance.
Should I save or invest my money?
But in reality this dilemma is flawed. Especially because the markets are in turmoil (due to fear of inflation and a possible recession), which makes them a dangerous territory in which to place investments. But nothing could be further from the truth.
In fact, in this dilemma, savings, understood as money set aside in a current account or a deposit for years (in the long term), is always the least attractive option, for several reasons.
The profitability of long-term equities is unbeatable
For any seasoned investor, that is, one who is not intimidated by falls, the question is never whether to invest or not (or where to invest my money ), but rather how long should I hold onto an investment to ensure profits ; the reason is the incredible profitability it offers.
Thus, the data published by Nobel Prize-winning economist Robert Shiller, covering the period from 1870 to the present, show that the average annual return has been 8.4% . This means that an investment of 1,000 dollars in 1949 would now be worth 143,000 dollars. Meanwhile, deposits barely offer 2% or 3% in exchange for leaving the money tied up for nearly ten years.
Download 4 Questions Before Investing
Bear markets, the best time to invest
The data is conclusive, but it can be qualified. And if we add to these figures that during bear markets we increase our investment, the returns can be much higher. After all, assets can be found at much cheaper prices.
That's why there's an old saying in the stock market that goes like this: when the market goes up, you put in money, but when the market goes down, you invest twice as much.
The importance of investing periodically
Furthermore, as investors we can benefit from what Albert Einstein called the eighth wonder of the world: compound interest . Let's take an example to make it clearer. If we decide to invest 10,000 euros and we assume a 5% annual return, close to that of the discounted market, a few points for commission payments, for 15 years. Then:
With an initial investment of 10,000 euros, we would accumulate 20,789 euros at the end of 15 years.
Combining this initial investment (10,000 euros) with a contribution of 250 euros per month, we would accumulate the maximum of 87,265 euros.
Platforms like inbestMe help you maximize your investments
Finally, there is one more advantage to be pointed out in the investment camp: the proliferation of investment platforms with reduced commissions and a wide range of products. One of them is inbestMe, which brings together some of the best index funds or ETFs, exchange-traded funds, at really low prices.
For example, for that initial investment of 10,000 euros that I mentioned earlier, the platform has some special packages (like those you can see in its ETF portfolio ) with one of the lowest fees in the sector and many attractive products: one of them is the iShares China CNY Bond ETF in dollars that yields more than 8% annualized over three years. Another is the Vanguard SRI European Stock Fund that yields up to 6.2% annualized over the last 10 years.
In short, if you are still wondering whether to save or invest, investing is always the right decision when you think about the long term ; and those decisions are even better at times like this. Therefore, if you want to start making your money grow, visit inbestMe and start investing at a very low cost.
But as is often the case with everything in life, that would not last forever. Thus, June 15 would be a historic day for the world economy and the markets. The Federal Reserve (Fed) approved a 75 basis point increase in interest rates. The decision was momentous for two reasons: first, because it was the largest since 1994. Second, because it was definitive proof that the era of free money was over.
Table of Contents
What does the aggressive US rate hike mean?
Should I save or invest my money?
The profitability of long-term equities is unbeatable
Bear markets, the best time to invest
The importance of investing periodically
Platforms like inbestMe help you maximize your investments
What does the aggressive US rate hike mean?
And so, almost overnight, the eternal question for investors and savers became correct again. After all, as the Fed raises interest rates, it puts a higher price on its dollars, and a cascading effect is produced in the rest of the world. The reason is that as the US currency is more expensive, the rest of the world's currencies depreciate, because the rest of the world's central banks are forced to raise rates as well.
But it is even worse, since not only has there been one increase, in June, but there have been more in the following months, which has put more pressure on central bankers. Thus, for example, up to 33 of the 38 most important central banks have raised interest rates in recent months. In Europe, for example, the European Central Bank (ECB) has raised them on two occasions.
The consequences of this sequence of actions are quite visible: firstly, the cost of borrowing and credit has skyrocketed. Secondly, banks have begun to remunerate, albeit timidly, the deposits spam phone number data of savers. Finally, the equity and bond markets have fallen sharply. Therefore, the eternal dilemma of whether to save or invest my money? has returned with a vengeance.
Should I save or invest my money?
But in reality this dilemma is flawed. Especially because the markets are in turmoil (due to fear of inflation and a possible recession), which makes them a dangerous territory in which to place investments. But nothing could be further from the truth.
In fact, in this dilemma, savings, understood as money set aside in a current account or a deposit for years (in the long term), is always the least attractive option, for several reasons.
The profitability of long-term equities is unbeatable
For any seasoned investor, that is, one who is not intimidated by falls, the question is never whether to invest or not (or where to invest my money ), but rather how long should I hold onto an investment to ensure profits ; the reason is the incredible profitability it offers.
Thus, the data published by Nobel Prize-winning economist Robert Shiller, covering the period from 1870 to the present, show that the average annual return has been 8.4% . This means that an investment of 1,000 dollars in 1949 would now be worth 143,000 dollars. Meanwhile, deposits barely offer 2% or 3% in exchange for leaving the money tied up for nearly ten years.
Download 4 Questions Before Investing
Bear markets, the best time to invest
The data is conclusive, but it can be qualified. And if we add to these figures that during bear markets we increase our investment, the returns can be much higher. After all, assets can be found at much cheaper prices.
That's why there's an old saying in the stock market that goes like this: when the market goes up, you put in money, but when the market goes down, you invest twice as much.
The importance of investing periodically
Furthermore, as investors we can benefit from what Albert Einstein called the eighth wonder of the world: compound interest . Let's take an example to make it clearer. If we decide to invest 10,000 euros and we assume a 5% annual return, close to that of the discounted market, a few points for commission payments, for 15 years. Then:
With an initial investment of 10,000 euros, we would accumulate 20,789 euros at the end of 15 years.
Combining this initial investment (10,000 euros) with a contribution of 250 euros per month, we would accumulate the maximum of 87,265 euros.
Platforms like inbestMe help you maximize your investments
Finally, there is one more advantage to be pointed out in the investment camp: the proliferation of investment platforms with reduced commissions and a wide range of products. One of them is inbestMe, which brings together some of the best index funds or ETFs, exchange-traded funds, at really low prices.
For example, for that initial investment of 10,000 euros that I mentioned earlier, the platform has some special packages (like those you can see in its ETF portfolio ) with one of the lowest fees in the sector and many attractive products: one of them is the iShares China CNY Bond ETF in dollars that yields more than 8% annualized over three years. Another is the Vanguard SRI European Stock Fund that yields up to 6.2% annualized over the last 10 years.
In short, if you are still wondering whether to save or invest, investing is always the right decision when you think about the long term ; and those decisions are even better at times like this. Therefore, if you want to start making your money grow, visit inbestMe and start investing at a very low cost.