Who wants to sacrifice present consumption like purchasing a new car or having that spring break in Fiji for future financial security? Apparently not many people in New Zealand.
Thursday, November 4th 2004, 6:46AM
by The Landlord
After all, you only have to look at the huge increase in use of credit (debt accumulation) cards over recent times. But how much money does it take for an individual to put aside now for a future with greater financial security?
Investing is basically the sacrifice of the certain present benefit (the new car) for an uncertain future benefit (increased income during unemployment).
You may have accumulated or inherited cash, or have the expectation of savings generated from ongoing income. Thus you have the choice ? immediate consumption or postponing spending till some time in the future. There may be many complex reasons for delaying spending until the future e.g. reluctance to borrow for major purchases, to cover ongoing expenses in the event of reduced income like retirement or to pass on wealth to a younger generation.
If you have decided to defer spending today, naturally you would expect some reward i.e. return. Realistically any investment involves risk, returns are not guaranteed but the investor may make choices to reduce the probability of losing capital and return.
