Everybody knows it’s a good idea to hold cash. Cash is there and ready to spend if you need to make a quick purchase or encounter an emergency. However, if you’re planning for the future, it might be an idea to invest some of your money.
For growing your money over the long term – five years or more – investments act differently to cash and equity markets historically adjust to consider variables such as inflation, supply chain issues, and interest rates.
It can be beneficial to remain invested in equity markets for the long term and any growth achieved can be reinvested, meaning your returns could compound over time. While inflation can eat away at cash reserves, investing could help protect against rising prices.
One way to manage the risk involved in investing is to hold a diversified investment portfolio. Diversified portfolios may hold equities in different markets, regions, and industrial sectors. This means they may have limited exposure if one sector performs badly and can also be exposed to sectors that may be experiencing growth.
A diversified portfolio can also hold other assets such as bonds, government, or corporate debt and this is often seen as a way to further extend the diversification within the portfolio.
If you want to know more about investing for the longer term, please contact your Wealth Adviser at Baggette & Co.