Given the current economic climate, should we save? Or invest?
During times of indecision, what is the most effective use for our money. Do we save or invest? Please state which country you are from, as this may clarify what you are saying, after all every countries economy is in a slightly different situation at the moment.
For my own finances, save. When it comes to investing, what do you invest in? As for the United States, we need to get rid of our debt and start working on our own finances. World wide? I have no idea. England is the main country that I know has huge economic need.
England being the country I am in... But you are correct, we are in an economic crisis at the moment. Even the U.S. are in roughly $16,520,251,000,000 worth of debt, which is about $52,393 worth of debt for each citizen. Wow!
Yep. We are pretty bad. What's worse is that I need to use financial aid to finish my degree. Does not make me happy, and makes me feel kind of guilty...
They are not mutually exclusive. If you are not investing for the long term, then you are not saving either. Longer term investing is the only way to ensure that inflationary forces will not erode the value of your savings. In terms of a strategy, that is dependent on the time frame. There should always be a short term cash equivalent emergency fund of at least 6 months - 1 year. The longer term investing should be done in the most tax efficient ways first such as a 401k/403b...etc. And then focus on a strategic asset allocation consistent with a risk level the corresponds to your personal goals. The current economic climate is irrelevant. The attempts to time market movements is an excercise in futility. The economy has been limping along with anemic growth rates for 5 years now. Yet US markets are approaching all time highs. In the year 2000 we had a projected budget surplus with projected robust GDP growth. What happened...The tech bubble burst and the market fell by nearly 40%. Financial markets and the economy are not siblings. They are more like cousins. They are related, but do not necessarily correlate in tandem.
The excessive debt is actually a long term potential positive for equity investments. It means the Central Banks will likely continue to devalue currencies to inflate away debt problems and will drive up asset prices. That tends to mean more volatility. And it is not a policy prescription I agree with. But it is the likely scenario we will see.
From US. Years ago we invested in mutual funds and things were growing nicely. Then things crashed and we lost quite a bit of money - and there wasn't a lot for us to lose.
So now we just save, that crash and losing money really left us scared to invest in the market. I still think property is a good investment.
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