Building Wealth
Save like a pessimist. Invest like an optimist
I read that somewhere recently. It stuck because it is so simply true. (Sorry, you who said it. I didn’t make note of your name.)
Until I began writing about wealth building, I don’t think I ever considered that there is a distinction between saving and investing. But sometime during the intervening years, I came to believe that there is a significant difference.
The purpose of saving is to put away money for a particular need at a particular time. Like buying a car in the future. Or paying for college tuition. Or retiring at a certain age. The purpose of investing is more ambitious and more nebulous. The goal is to put some portion of one’s savings into specific assets in order to see them grow.
Thus, the number one rule of saving is: Take little or zero risk. Investing, however, mandates risk. The challenge is to determine how much risk you are willing to take.
We all have different assets and resources available to us. And different economic needs and aspirations. Thus, we must set our own goals and devise our own wealth-building schemes.
I put my “saving” money into debt instruments, rental real estate, gold, and museum-grade art.
I put my “investing” money into stocks, options, REITs, certain speculative investments, and – most of all – privately owned businesses.