Invest or save? The first thing we should know is that it is not the same. They’re not even similar. The first is framed in the financial world, which encompasses theories as diverse as that of Portfolios, by Harry Markowitz, or the theory about asset price prediction by Eugene Fama, Robert Schiller or Lars Peter Hansen. For its part, the second is framed in microeconomic theory, it is the center of an intense theoretical debate about its effects and confronted the two great economists of the 20th century, Hayek and Keynes.
But beyond being two different concepts, there is something undeniable: both reinforce each other. Especially when talking about individuals and their life goals. In this case, both actions complement each other to create an even greater return, which helps each one achieve certain financial goals that were previously established.
Before knowing whether we invest or save, what do these concepts mean?
What is saving?
For the Royal Academy of the Spanish Language, saving is reserving some part of ordinary spending. In economics, a somewhat more technical definition is used which means that it is a deferral of spending, that is, saving is not spending today to do it tomorrow. Another vital characteristic of savings is inferred from this economic concept, and that is that it allows us to achieve a future objective.
What is investing?
Investing is, in short, the process of purchasing assets that increase in value over time and/or provide returns in the form of payments or capital gains. In the case of financial investments, these refer to operations carried out in securities such as stocks, bonds, bills of exchange, bank deposits and other financial instruments.
Save or invest? Better to do both
As you have seen, saving and investing are totally different things. However, their complementarity makes them two key elements for our financial health. Also for our future, since by combining both we can achieve almost any (realistic) goal we set for ourselves, such as buying a house or a peaceful retirement. To do this, yes, you have to know how to combine both.
Savings: the basis for building your future
Saving is essential in our lives, although sometimes it is difficult to accumulate it. Saving is restricting our daily spending in order to be able to use that remainder in the future to achieve a specific objective. Although its importance goes much further, for example, because it allows us to grow our assets or serves as a cushion with which to face possible emergencies. Among the motivations we can have to save, the following stand out:
- Create an emergency fund.
- Pay off our debts
- Invest
- Travel
- Pay for our education or that of our children
- Ensure a peaceful retirement.
- Have financial stability
Investing: the push we need
We have already seen that saving is essential. However, savings alone are not useful, but we need help: investment. In short, investment puts our money to work, that is, it begins to generate interest with which our assets can grow. But investing our money not only allows us to grow faster through compound interest, but also helps us defend ourselves against inflation that tends to take away our purchasing power.
In short, saving alone is not enough, but something will be needed to enhance it and make that saved money grow. That’s the investment.
You don’t have to choose between investing or saving with the Savings Portfolio
One of the best formulas to combine savings and investment is to use what is known as a savings portfolio. A savings portfolio is a product that offers an attractive return in exchange for depositing our savings in it, thanks to the fact that this money is invested in different funds (such as monetary funds) or financial products that, in addition to offering a return, are also safe and liquids.
In the end, savings portfolios stand out because they are a good combination of return and low risk, in such a way that our money grows continuously without fear that we may lose part of our capital. In addition, being a liquid product, it also allows you to recover the money invested at any time. You will, therefore, be able to invest and save without being an investment expert.
The role of robo-advisors
Regarding hiring a savings portfolio, you should know that there are different versions. One of the most attractive is the one offered by robo-advisors, given their high return. In fact, the assured return they offer far exceeds that of banks, which makes them a highly in-demand product today.
Although, it is not only returns. These platforms also offer a huge range of financial products with which to complement our savings portfolio, in addition to having very competitive costs and a simple and intuitive interface and operation. All of this not only helps you increase your savings more quickly, but also helps you in your daily life.
The inbestMe Savings Wallet
A good example is inbestMe, a robo-advisor with more than five years of experience in Spain, which offers with its Savings Portfolio in euros up to 3.60% IRR (Internal Rate of Return). Although, this return is even higher if you contract your savings portfolio in dollars, since it reaches up to 5%. This difference is mainly due to the fact that returns are linked to the interest rate of each currency (set by the Central Bank) and in the United States it is higher.
As for the rest of the features, the inbestMe savings portfolio can be contracted from 1,000 euros and does not require permanence, has no limit and does not require you to have contracted other products. All this makes it a perfect product to invest or save in a simple and risk-free way.
