Your Money's Making Money: Saving vs. Investing

Summary

This chapter discusses savings, investing, and the need to have a diversified financial portfolio. Investing is fantastic. We can also minimize our risk when we invest by making sure our investments are diversified. For our income to be future‐proofed, we need to have money on hand for emergencies and also be investing. A factor that isn't accounted for in the bar graph about saving versus investing is that inflation can eat away gains made. For example, the U.S. Federal Reserve estimates 2% inflation over time. The stock market is a common investing tool. By having lots of different plants, our chances of having some flourishing plants is high! Similarly, it's good to have a diverse portfolio with lots of different stocks. Diversification has been made even easier because people have decided to make bundles of stocks called index funds and exchange‐traded funds.