Invest to grow your wealth: Choosing the right option
There’s a difference between making money and building wealth. While the aim of investing your money is to make it grow and savings and investments can help you in your wealth-building journey, building wealth is a much more comprehensive process.
For a wealth-building strategy to be effective, it needs to be personalised and suitable to your circumstances.
What does it mean to build financial wealth?
In the financial sense, wealth refers to all the resources/movable or immovable property you own. This includes (but isn’t limited to):
- Cash, money market instruments, fixed interest investments, unit trust or listed investments
- Insurance/risk solutions, structured solutions, pension fund, retirement annuity, fixed property and shares in private companies
- Your net worth (assets minus liabilities)
Building wealth is ultimately focused on achieving financial independence and therefore also the absence of debt will contribute to your wealth. That’s because the less money you have to pay away, the more you can add to your savings and investments and give it the opportunity to grow.
While it can be difficult to avoid debt, it should be taken on with consideration of how it will contribute to your goals. For example, buying a home means taking on debt now, but in the future, that asset and its potential appreciation could set you up financially.
3 Steps to building wealth
| Step 1 Earn money or have a passive income |
Step 2 Save money |
Step 3 Invest |
|---|---|---|
| You need a source of money to be able to make more of it. | Accumulate a meaningful amount to set you up for investment growth. | Start as early as possible: invest for the long term to give your investments a chance to grow. |
Investing is one of the ways in which you can build wealth, but how you invest is based on what your financial goal is.
How do you decide on investing to grow your wealth?
Investments perform differently at different times. Furthermore, your tolerance for risk, how long you have to achieve your goal and how all of this fits into your financial plan need to be considered.
The strategy you choose will guide your investment decisions but remember that strategies are flexible and you can incorporate different ones at different times depending on your current financial situation and what your medium- to long-term goals are.
Define your goals and develop a plan
If you’re looking to build a comfortable retirement, want to own assets or create a legacy of abundance for your family, a long-term growth portfolio is a way to tailor your investments in a way that maximises them and (potentially) achieve higher returns to generate a sustainable income at retirement.
Over the long term, you want to grow your money but also protect it and maintain stability. Diversifying your investments helps you reduce different risks and volatility but also stretches your exposure and amplifies your ability to grow your money. Similarly, having the appropriate insurance in place means you’ll be financially protected when hazards (or life) happen.
Want to invest for growth?
The sooner you start, the more time and flexibility you’ll have to grow your wealth. Speak to one of our Wealth Managers who will conduct a detailed financial needs analysis to see how to best incorporate investing in your financial plan to help you reach your personal financial goals and build your wealth.
Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).
Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.