{"id":14201,"date":"2021-01-15T09:00:09","date_gmt":"2021-01-15T08:00:09","guid":{"rendered":"https:\/\/my-life.lu\/?p=14201"},"modified":"2024-11-06T08:30:04","modified_gmt":"2024-11-06T07:30:04","slug":"saving-and-investing-getting-the-right-mix-30076","status":"publish","type":"post","link":"https:\/\/my-life.lu\/en\/saving-and-investing-getting-the-right-mix-30076\/","title":{"rendered":"Saving and investing: getting the right mix"},"content":{"rendered":"

The aim is to come up with a long-term strategy for your personal finances.<\/p>\n

Whether you save a small amount each month or you\u2019ve built up a substantial nest egg, the key question remains \u2013 should I save or invest? Interest rates on savings accounts are still modest, especially when you factor in the reality of inflation. The markets are unpredictable and the risks are not insignificant. So what should we do?<\/span><\/p>\n

Saving is generally safer; investing yields more in the long run but the trade-off is you take on more risk. Aside from this rule of thumb, there are a few other things to consider when making this kind of financial decision. The aim is to find the right mix and come up with a long-term strategy. Managing your assets means building up and maintaining your financial security.<\/p>\n

At the top of the pyramid are the investments that fund major life projects.<\/p><\/blockquote>\n

Three-tiered pyramid<\/h2>\n

A three-tiered pyramid<\/strong><\/span><\/a> is a good representation of how to save and invest. At the base is the financial safety net, which is your buffer against unexpected or major expenses. This is built up over the course of regular deposits into an account, usually by standing order. Building loan contracts and savings plans also fall under this category. It\u2019s also worth thinking ahead and diversifying your savings to protect you and your family should your assets drop in value or your income suddenly disappear. The middle tier of the pyramid consists of life insurance<\/strong><\/span><\/a> and\/or pension plans<\/strong><\/span><\/a>, among other things. The interesting thing about these products is that you can immediately benefit from tax advantages. At the top of the pyramid are the investments that fund major life projects. The best solution here will naturally depend on your investor profile. If you don\u2019t have one yet, you can contact your Relationship Manager who will be happy to help. This profile serves as a guide when choosing which investment products to use (SICAVs, structured products, equities, bonds, etc.<\/strong><\/span><\/a>), and helps define the level of professional asset and financial management support required.<\/p>\n

Repaying debt as an option<\/h2>\n

In many situations, a good investment is to pay off debt<\/strong><\/span><\/a>. Of course, it\u2019s even better to limit borrowing wherever possible or even avoid it altogether. This can be achieved with careful investment planning in advance. After all, debt often costs more than the return on investments, especially when you opt to save over invest.<\/p>\n

To save or to invest; that is the question<\/h2>\n

Saving and investing are different objectives; you just need the right mix. It\u2019s not about deciding on one over the other, but finding the best solution that fits your needs. The following table gives interesting answers to key questions:<\/p>\n

\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t\n\t
QUESTIONS<\/strong><\/th>SAVING<\/strong><\/th>INVESTING<\/strong><\/th>\n<\/tr>\n<\/thead>\n
What goal?<\/strong><\/td>Good things come to
\nthose who wait
\n(security)
\n<\/td>		Well begun is half
\ndone
\n(risk and return)
\n<\/td>\n<\/tr>\n
What configuration?<\/strong><\/td>Build up a safety net for larger, unexpected expenses or to fund medium-term projects <\/td>Grow capital,
\ndiversify your investments
\nor build up a supplementary pension
\n<\/td>\n<\/tr>\n
When?<\/strong><\/td>As soon as possible, because it always makes sense to have money put aside<\/td>Depends on the person, but
\nthe investor profile
\nshould always be adapted to
\nyour situation
\n<\/td>\n<\/tr>\n
What investment horizon?<\/strong><\/td>Very short-term to long-term<\/td>Medium-term or long-term
\n(short-term is possible
\nbut strongly discouraged,
\nunless the investor is experienced)<\/td>\n<\/tr>\n
What risk and return should be involved?<\/strong><\/td>Low to limited<\/td>Moderate to very high; no requirement in terms of result<\/td>\n<\/tr>\n
How much expertise and time are required?<\/strong><\/td>Little to none<\/td>Lots of know-how, lots of time (especially without professional assistance)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Overview of popular investment solutions<\/h2>\n

Bonds<\/strong><\/span><\/a> are fixed-income securities issued by companies and other institutions that wish to raise capital. Put simply, when you buy a bond you are lending to the issuer. This money is paid back in full at a certain point in time (the maturity date); however, the bondholder may receive regular interest payments (coupons). The term \u201cfixed-income\u201d means that the investor knows exactly how much they will receive at maturity.<\/p>\n

Equities<\/strong> <\/span><\/a>are securities that represent an ownership interest in a company. Purchasing an ordinary share of a company generally grants the investor the following:<\/p>\n