Investing does not have to be complicated. It requires an understanding of basic concepts and recognizing and seizing the opportunities that arise. This column will give you the tools you need to invest in the future. What would you like to know about investing? You can email us at news@ttutc.com

Saving and Investing: Know the difference

Do you have a clear guideline to distinguish saving from investing? Most of us don't and as an investor you could end up paying a high price in today's volatile market.

Most of us instinctively know that saving and investing are not the same, but do we understand the difference? Because clarity in this distinction can greatly impact one's financial well being, realizing the difference is vital because it will impact on the choices you make in your portfolio.

SAVINGS

Savings are low risk funds that must be liquid or readily available when you need them. The purpose of saving money is so you can have it for a specific purpose within a short time frame. Savings are usually put into the safest places or in products that allow you access to your money at any time.

An Emergency Fund falls into this category. When an emergency occurs, the money is needed immediately and a condition is that it must easily accessible. Its purpose is not to make a bunch of money; it is there for emergencies only. Another is the Car Fund where you want to access the money when you need to and even to take advantage of a good bargain, if it arises.

Home repairs, a lawn mower or a new computer are all examples of saving, where you need a set amount of money by a set date. We are not born with a Saving DNA, so saving must become a habit from early in our lives which can help build our confidence in handling money later on.

INVESTMENTS

Investments, on the other hand, are for wealth building, and will not be needed for many years. Yes, investments do involve greater risk but investments also yield much greater returns when left alone long enough to ride out any turbulence in the market. So what constitutes an investment ? The key to investment is to ensure that your portfolio is diversified, which involves building a balanced portfolio of stocks, bonds and cash or short term investments.

One of the best investment options is having a mutual fund. It allows individual investors the opportunity to pool their money into a fund which is managed by a professional, and the manager then invests the combined funds into various stocks and bonds. What this does is allows someone who does not have that money to invest to essentially buy into a lot of different stocks, diversify their risk, and own some more expensive stocks on a small investment.

If your fund makes money off of bond interest or dividends, you are typically paid out that money automatically. You can also choose to reinvest it. If the shares of the stocks your mutual fund holds go up in price, your mutual fund's shares go up as well.

The UTC has a plethora of investment funds to suit life's changes. For beginner investors, the TT$ Income Fund offers competitive returns with relatively low risk. Investors who want their money to have opportunity to earn income while having need quick and easy access to their cash would do well to consider this fund.

For investors with young families, the Children's Investment Starter Plan (CISP) is good way of starting an investment plan, that will grow with any child. The proceeds of your CISP are invested in UTC's Growth and Income Fund, so your CISP investment continues to grow throughout the child's school years.

Retirement is a big change for anyone and is a crucial element in any your investment portfolio. UTC's Universal Retirement Fund where you enjoy long term capital appreciation should be a part of any investor's portfolio.

BREAKING IT DOWN

The difference between investing and savings is really quite simple. If you are going to need the money in the near future, save it. If you aren't going to touch the money for a longer time frame, invest it. The trick is defining the time frame.

Do you have any questions or comments about this column? Are there any topics that would like covered? Please email us at news@ttutc.com