Home » Business & Finance » From a Savings Account to an Investment Fund
Jun
03

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When is it time to switch from a typical interest bearing savings account to something more? In short, whenever you want to; but you technically want to make sure that you have enough money to purchase the investment. What are some of the reasons to switch or obtain an investment fund instead of using the typical savings account to save money?

One of the main reasons is income growth rates; the rate at which your money can increase in an interest savings account is normally slower than when invested in some type of fund. Another reason you may want to invest in a fund instead of using a savings account is to keep you from using the money at any leisure time period; when using a savings account, you can access your money a lot easier therefore thwarting your goals of savings. Either type of account allows several ways for you obtain your money conveniently but when investing in a fund, you tend to be a little more conscious before withdrawing than with a savings account. Other reasons to use an investment fund rather than a savings include; retirement planning, college planning or to create capital to acquire real-estate or preparations for launching a business.

If you’re sure that you are ready to switch from a savings or you just want to add an investment fund to your to your financial roster, you need to know what you are planning on accomplishing with the capital first. Afterwards, you need to know how long or fast or how soon you will need the money you are investing, so that you know what type of fund to invest in. If you have short term goals, then you will want a quick return on your capital, therefore, you will need to invest larger amounts of money into a fund. If your goal is for long term growth, then you can invest smaller amounts of money over long periods of time into the fund. Short term profit off of funds are usually consider to be high risk investing; this is due to the fact, that it takes large amounts of money to gain a large amount of shares, and those shares are being invested into funds that are constantly fluctuating(in price) up and down. These funds can hit rock bottom in an instant, so if you have a goal to gain in the short term time period, it’s best to obtain a broker, go to school, or do some intensive research about investing before you jump in head first. Long term investing, gives more room to experiment, but it is advised that you acquire a broker or a professional in order to gain from your capital/investment money.

There are several ways to get into investing in funds. You can acquire a broker from companies like Edward Jones, or you can setup online accounts with companies like Trading Direct who also offer brokers and consultation. The do it yourself strategy is also available through both of these companies as well, but serious time should be put into understanding the basics and complexities before spending any money.

Investing basics start off simple; you take $10.00, and you purchase 4 shares of a company. The 4 shares cost $1.00 each, so you divide $10.00 by the 4 shares you are purchasing for $1.00 and you get $2.5 dollars invested into 4 shares. Now that’s about the simplest part of the equation; every time the fund you invested in goes up or down, it adds to your shares. If the funds as a whole goes up $1.00 then each of your shares purchased goes up a dollar; so look at the shares as individual units. This is the reason why investment funds are better than interest bearing savings accounts, but the funds can go down and then this is the reason they are not better than interest bearing savings accounts. So if your fund loses a $1.00, then each share that you’ve purchased loses that $1.00 as well. Smart investing, smart investing, smart investing…………..this is the key to investing, and you can’t be smart, if you don’t have the knowledge.

In summary, investing in funds gives you more versatility when it comes to capital gains, simply because you can change the ‘return rate’ at any time. If you want a higher return, you find a fund that yields higher returns, if you want steady growth with a lower potential of hitting rock bottom, you simply find a fund that gives you that. Some funds also give dividends and these can be seen as gifts to you for investing in a fund. Dividends are paid out to your fund on a company scheduled basis, and can be large or small amounts that you can either reinvest into your fund or cash out. Now that you have the basics, do some more research and put your money to work for you.

 

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