Saving vs. Investing: Modern Guidelines for Today's Investor
By David E. Morse MBA, PFP, CEA
In our profession, we often are providing guidance and advice on an individual’s life savings, or investments.
The following are a few thoughts on the major differences between the two. These are general guidelines only and of course there are exceptions. What prompted this was a client who recently asked us to find her the best GIC rate possible. When we told her, she replied: “seriously?”
Savings
The very word “savings” seems quite old-fashioned today. Recall your first stereo, bike or used car. You likely saved until you had enough and then bought it. If you had asked your parents if you could use their credit card or if you could borrow the money… OK, you wouldn’t have even asked.
Generally, savings would be for a defined purchased like a vehicle, a trip or a wedding. If proper planning was done, we usually know in advance the cost within a close range. We take the cost, divide it by what we can afford to save and then we will know how long before we can make the purchase.
So let’s say things we are going to buy within 2-3 years. In this case, a high interest savings account, redeemable GIC or a very low-risk mutual fund (short-term Government Bond Pool, Money Market Fund, etc.) if possible within your TFSA would be the way to go. This same category would apply to an RESP if your child/grandchild will be needing to draw on this within 3 years. You may have set it up as “growth” when they were age 5 but leaving it there for your now 15-year-old is generally a bad idea.
Investments
This category usually involves a longer-term goal. The most common would be retirement but it could also apply to charitable giving or estate planning to name two others. Managed portfolios provide a targeted weighting and automatic rebalancing. A broker might recommend a list of stocks and bonds and recommend changes from time to time.
The approach you decide to take is always your choice but it is important to know what type of investor you are.
If you want results but do not have the keen desire to follow the markets and keep up to date on the economic news du jour, then a managed portfolio approach is worth considering.
If you live and breathe the markets, buying and selling often may work for you.
The very first step in any case is always to complete a detailed investor profile and have it reviewed by a qualified Financial Advisor. This is valuable in helping your Advisor make the best recommendation based on your own circumstances.
Get in touch with our team today to start your investor profile and start your path towards an approach that works for you.
“The first step in any case is always to complete a detailed investor profile and have it reviewed by a qualified Financial Advisor.”
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