Financial Tips: Saving vs. Investing by Black Jacket Group Conserving money is useful especially for a rainy day. Many people prefer the convenience of being able to have access to their money with just a one trip to the bank. The accessibility is definitely a personal selling point for the saver. Whether you have a savings account or shoebox, the act of saving has more drawbacks than advantages. Inflation is the main drawback when it comes to saving. Inflation causes the price of goods and services to increase therefore decreasing the purchasing power of each dollar. According to Bankrate.com, the national average in regards of interest rates for saving accounts is a disappointing 0.11(APY), while the current rate of inflation is 1.13%. In that event, inflation is out pacing the Annual Percentage Yield by over 1 %. It shows that the opportunity cost of investing outweighs the act of saving. From a wealth management perspective, investing in the stock and bond market is more beneficial. For the past 5 years, the average return for the major exchanges and indexes surpassed the rate of inflation: The Dow Jones produced a 5 year average of 8.9%; S&P 500 produced an average of 10.7%, and the NASDAQ produced an average of 14.31%. When comparing the numbers, it seems pretty logical to invest your money rather than save. Your personal preference can determine whether or not you profit from current market conditions. A lot of investors are staying away from the stock market due to market volatility. Short term swings are becoming major catalyst for weak investor confidence. For example, billionaire investor George Soros sold more than a third of his U.S. equity position, reallocating it to gold. The current state of the global economy is presenting unprecedented opportunities for value
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