Should You Invest Instead of Saving? – Guest Post
The last few years has seen trust in global banking institutions suffer an astonishing fall from grace. There was always a feeling that there was some unease loitering beneath the surface when it came to public opinion, however the worldwide recession helped it to explode into the global conscious with frightening ease and haste.
Everybody has seen the consequences of this in some way. One of the more poignant images of the darkest days of recession was people withdrawing their savings from banks, and queuing for hours on end in some cases to do so.
All of this withdrawn money needs to go somewhere, however. It cannot just sit in a person’s home or be hidden under the mattress waiting for someone to find it. At the same time, many are wary of again placing trust in banks, so could find themselves looking for another savings option. Could private equity investment feasibly be an option?
Investing vs. Saving
Although being an alternative to traditional savings, there are many aspects related to investing that are similar. For example, the best savings accounts in terms of interest are often large lump sum and fixed rate based. Should you wish to invest, you can put in the large lump sum as you would with a bank savings account, and then benefit from what will likely be a higher rate of interest.
With all financial matters there is risk attached, and in terms of private equity investment it is the potential for you to get back less than what you put in. There are, however, a number of private equity firms who operate in low risk sectors, which translates to a steady albeit not spectacular rate of return. Investments can also last longer than a lot of fixed-term savings accounts, although you will often be able to choose a term that you are most comfortable with.
It is important to note that most of the unease around banks at the moment is purely based on a perception. The reality is that even if you do choose a savings account at Barclays, for example, you are unlikely to lose everything because some unscrupulous trader makes a questionable decision based on commodity trades.
For those that value peace of mind, however, much of the private equity sector has a well-earned, sympathetic reputation, and as such does provide a great opportunity for an alternative to a savings account.
The main question anyone considering investment needs to ask themselves is how much risk they are comfortable with, based on possible returns, and how long they wish to commit any sum of money for.
Those looking for instant access to funds should stick to a savings account bearing the name. Investments are great ideas, however, for those committed to longer-term savings and building a fund for later life, or with a fixed goal in mind for the future.
Rob is a writer for Dealmarket, a private equity marketplace online with a wide variety of private equity funds and deals to be sought from both investors and entrepreneurs.