Some of the Most Common Terms Used in the Savings and Investment World

Savings: An amount of money kept aside, mostly in a financial institution such as a bank, possibly for future use. An amount of money is not spent on current expenditures.

Income: What you earn from your investment. Examples of income include coupons obtained from mature bonds, dividends payments from unit trusts/shares held, and interest earned from a fixed deposit account.

Risk: Generally, a risk is defined as a situation involving exposure to certain danger. All investments have certain elements of risk that an investor has to bear. There is an age-old financial maxim that the greater the risk, the higher the rewards. However, when investing your hard-earned money, you should keenly understand the risks you are being exposed to to make an effective decision on whether to commit your money or not.

Investment horizon: This is the amount of time you take to invest to realize your financial objectives.

Return on investment: This is the gross gain or gross loss that you realize out of an investment. If say you invested in an item, then the return on that investment can either be a gain or loss in the price of that item.

Net returns: The total returns from your investment, less operational, administrative, and other related charges. It’s the actual profit or loss after eliminating accompanying costs.

Capital gain/loss: Simply the gain or loss that you make as a result of selling an asset/product at a price above/below the price you paid to acquire it.

Structured Settlement: A type of annuity that is created to pay out a settlement for a personal injury of some type. This arrangement protects both the payer and payee. The payer does not take a huge financial hit on the settlement as it is paid over time of 20 years or more. The payee is protected as if they have poor spending habits, they will not blow the settlement money quickly and find themselves in dire financial status. To learn more about possibly selling your structured settlement, visit this website.

Factors you should consider before you save or invest any amount of money.

Below are the most vital factors that you should give ultimate consideration when faced with an investment option to settle on.

Clearly identify your goals: What do you specifically want to achieve by saving or investing that money? Do you want it to grow? Or do you just want it to stay safe regardless of any profit? And how long are you willing to wait for it to mature?

Do you have an emergency fund? Before committing any amount of money towards savings or investment, you should have a cash reserve or a source of income capable of sustaining you throughout the period/time of the investment.

Clearly, understand the risks involved: Are you capable of bearing the risks linked to your savings or investment? Are you able to move on in case you, unfortunately, lose all or part of that money? Deciding to invest part or all of your money is a serious decision in life, and such vital decisions have accompanying rewards: negatives or positives. Are you able to live with the consequences of your decision to invest that money?

Carry out in-depth research on other various savings and investment options available: Don’t settle on a savings or investment option with minimal rewards when the best investment option is just a few minutes/hours/days of research away. Visit local financial institutions and insurance companies to explore various products that have the potential to offer you better returns for your money.

Read in between the lines: Go through all the details of that option you want to settle on. Know all the terms and conditions of what is offered. Know what you’ll gain by holding on to your investment until maturity, and what you may lose by any abrupt withdrawal of part, or the entire amount. You will always have a peace of mind by investing in a product you have full knowledge of.

Establish the cost of your investment: One true sad fact with most investment products from some financial institutions is that they have certain hidden costs which mostly, are never openly shared with clients.  Most clients only get to know about these hidden charges at the maturity of the invested amount, or when withdrawing the invested amount. Nonetheless, such costs (if any), are usually minimal and should not bar you from realizing your larger investment goals. But to be safe, invest from the point of knowledge.

Have plan B: What do you do when your sole investment option fails to live to your expectation? Do you just walk away heartbroken and vow never to invest any money again? Investments aren’t matters of life and death. You may fail in one but succeed in another. The best investment strategy is always to find ways of spreading/minimizing the risks associated with your investment. If you have adequate cash, it’s advisable to diversify your investments.