Why Should I Save?
1. To meet my goals
As you can see above, investing in equities offers the best path to inflation beating returns over the long-term. However,as you can also see markets can be volatile in the short-term, rising and falling in line with prevailing market conditions. However, thanks to an investment concept called euro cost averaging market volatility can actually work to your advantage.
Investing regular monthly amounts means that you can turn stockmarket volatility to your advantage when you invest in a regular premium product.. This is because your contributions buy more units when prices are low. So following a market recovery, all the units purchased by your plan benefit from this recovery. Euro cost averaging effectively lessens the risk of investing a large amount in a single investment at the wrong time.
2. To protect my wealth from inflation
To protect the real value of your money against the ravages of inflation, your money needs to produce a return after tax that is greater than the rate of inflation, which as you can see from Tatyoflation can be quite substantial! So, if you want to make a material difference to your long-term wealth, it is worth considering investments that have the potential to outperform inflation
3. To benefit from the ‘miracle of compounding’
Coined by Einstein as the ‘eight wonder of the world’, compound interest makes your money work harder for you. When you invest initially you make a return on your initial investment, then the next month you make a return on both the initial investment and the previous months return it generated.
A handy way of understanding the impact of compounding is considering the rule of 72.