Risks and Returns on Savings

Saving money is probably the best investment you will ever make. It costs nothing and it’s simple. Saving is important in many ways. Long-term investments are part of your future, for example with pension savings and building capital. At the same time, it is also important in the short term, precisely to avoid having to borrow money. By saving money and putting away, you create the conditions for yourself to be able to do and buy the things you want without taking an expensive loan.

Think about what kind of savings you want


Of course, there are many different ways to save money, and you have to think about what kind of savings you want. Do you want to save quickly or place money safely? What risk do you want to take? Risk and return are often opposite concepts in the financial world, and the balance between them is always important. Do I want to risk less but also probably have less chance of earning good, or vice versa? Should I sacrifice some of my good sleep to try to get a higher return?

Depending on factors such as your age, income and your investment goals, you may either be willing to take significant financial risks in your investments, or keep your money safe. Before deciding on an investment, it is crucial to determine how much risk you are comfortable taking.

Investment involves risk and return

Investment involves risk and return

Many people draw the resemblance between investment in the financial world with casino games. One has to think in part the same way, and the concepts of risk and return are also equally relevant. How much do you have to deal with? How much are you comfortable with betting, and are you prepared to not always win? Set clear boundaries, and stick to them. Take a look here at the different types of games available at a casino online, and to see how it works.

The advantage of investing money compared to playing games for them is that they are not lost in the same way if things go bad. A bet you bet on usually has only two outputs – either you win money or you lose the entire bet. This is not the case with normal investments. If things go well you make money but it can also go more or less badly. You can lose some money or maybe a little more but rarely everything you bet. In addition, you often have the chance to refrain from selling, in order to possibly wait for a future upturn.

For investors, the basic definition of risk is the chance that an actual return on investment will differ from what was expected. The risk can be measured in the statistics with the standard deviation. Because of the risk, you have the opportunity to lose some, or all, of any investment. The return is the increase in the value of the capital (or can it be a little unlucky, a loss, a loss) when you invest them in a specific investment.

Different types of savings

The most common type of savings is in a classic savings account. It is safe, but provides a low return. Another type of savings account is a fixed interest account. There you lock the money for 1-3 years, and during that time receive a higher interest rate. However, it is not possible to withdraw the money in the meantime.

If you are aiming for high growth, many people recommend stocks. There are low fees when shopping online, and it is not necessarily risky. This can provide a safe and high return for longer periods. Another option is funds, for those who want to save with a large risk spread. A mutual fund is a pool of several different shares, and it is managed by a fund manager.

Preserve and increase in value


Gold and real estate are other opportunities for investment, which usually preserve and increase in value. You can also invest in currencies and some other things. What you should choose depends on what you are interested in and how much you want to get into the topic. For anyone who is a beginner and does not want to do much active or gain much knowledge, cheap equity funds / index funds are often the best choice.

The safest thing, for those of you who want to sleep well at night without thinking about the economy, is of course a regular savings account or possibly a short interest fund. But it is easier than many people think to invest in equities, and many financial experts say that it is always worthwhile in the long run to have a shareholding rather than having it. If the market goes down, it will also go up again.

Funds are, as I said, a good alternative precisely because it allows you to invest in shares with automatic risk spreading. gone well at all. No matter what you choose, the most important thing is to not take a greater risk than you are comfortable with.