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The Hispanic American Financial Experience - Prudential

Making the move from saving to investing

So you've made saving an integral part of your life. That's great. But what about investing?

Chances are you haven't made that leap, according to a recent Prudential study. Our 2014 "Hispanic American Financial Experience" study showed that 37 percent of Hispanic Americans identify themselves as savers but only 5 percent identify as investors. While it's important to save, if you ignore investing, you may find yourself unprepared to meet long-term goals. That's because investment products offer opportunities for you to seek a better return on your money, which you may be losing out on if you're just holding cash in a savings account. However, when investing, you may need to endure some risk, including the possibility of losing some or all of your money in any investment.

What's the difference?

Saving is the act of setting aside money for emergencies and short-term goals, such as buying a house. Your top concern is that your money will be available when you need it. Accordingly, savings is generally held in accounts that are low risk and readily accessible, such as an FDIC-insured bank savings account or certificates of deposit.

Investing is buying a product you expect to appreciate in value, such as a stock, bond or mutual fund, so that your wealth may grow over time. The target is usually a long-term goal, such as retirement savings or your child's college tuition. Your top concern is how much your money will earn on top of the principal you contribute. When investing, you'll need to balance the expected earnings against your appetite for risk.

How to start investing

After you've created an emergency savings fund (financial professionals generally recommend that you set aside three to six months of living expenses), consider opening an investment account to save for future goals. Here are some tips to help you get started:

  • Define your objectives. Deciding how to invest your money will depend upon your personal circumstances, including your investment goals, time horizon and tolerance for risk.
  • Set goals and plans to reach those goals. Make a list of your goals, such as paying down debt, saving for your children's college education, or saving for retirement. Then, set a plan to start reaching those goals. For example, set a budget, a payment plan to pay down debt or a 529 college savings plan to save for your child's education, or enroll in your company's 401(k).
  • Diversify your investments. All investing carries risk, but putting all your eggs in one basket is particularly dangerous. Instead of buying one stock or bond, consider spreading your money among various investments. Especially for beginning investors, an easy way to diversify is by purchasing shares in a diversified managed mutual fund—an investment vehicle run by a professional manager. Diversification can't guarantee that your investments won't suffer if the market drops. But it can improve the chances that you won't lose money, or that if you do, it won't be as much as if you weren't diversified.
  • Get help. If you're not comfortable investing on your own, a financial professional can help you build a portfolio aligned with your goals and risk tolerance.
  • Get started now. Every day you wait to start investing is one more day that you're not giving your money a chance to compound in value.

It is possible to lose money by investing in securities. There are inherent risks involved and there are no guarantees that your investment objectives will be achieved.

The Prudential Insurance Company of America and its affiliates Newark, NJ

Prudential Financial, its affiliates, and their financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances.