Insurance or Investment? You would be thinking, “Is this even a question”? But apparently, it is. A lot of people don’t invest in the stock market because they’re afraid of losing their hard-earned money, while some others think insurance is a waste of money.
Have you ever thought about what would happen if your car was stolen or you were involved in a major accident? Insurance has always been the most reliable way to protect yourself from such potentially disastrous events.
But again, do you know that there is no ‘win’ button on insurance? It is either a small loss or again – a small loss. So, is it really a waste of money?
First, Let’s see what investment and insurance have in common.
Can insurance and investment – tiger and cheetah – have any similarities? Well, they do. For example, both can take a lot of money. But the biggest similarity between insurance and investment is that both are almost equally, the biggest pillars of the economy. Other similarities include:
- A lot of money is spent on these two activities in one form or other. This always gives them a great power to contribute to a country’s economy.
- Both insurance and investment are dedicated to unlocking the power of money. You can compound your money with investment, and you can compound your skills with insurance, having no longer need to be anxious about loss of your property. We are trying hard to find the similarities, so consider this one too.
- Money can be made in but only by sacrificing something in another form. There’s a lot of money up for grabs in both industries.
We did manage to find out some similarities between insurance and investment. Now the differences?
Both insurance and investment are different in many ways. Here are some of the differences:
- Insurance is defined as an act or practice that insures, protects, or indemnifies against the loss of money or property. Whereas investment is defined as an activity that involves the placing of capital in a business enterprise in order to create additional value, provide a return on investment, and provide security.
- The two activities have always been kept separate from one another due to their diverse purposes. People think insurance is investing because it can, in one sense, get returns for you but it’s not very much like a stock market entry where you can put your money and get returns only after it increases further.
- Insurance is designed to protect you from loss, while with investment, the loss or win is in your hands.
- As an investor, you should know that the only way to keep your money working for you is by taking risks. The reward of investing is high if you have a long-term view and are dedicated to it, but the risk is also high.
Investing in financial markets or getting insured?
The best investment is the one that is not only suited for you but made for you. The current ‘you’ is changing all the time.
If you are young, for example, it is the best time for you to get started with investing in stocks. A young investor can reach his/her goals faster than an old investor, simply because that young person has more time in his/her hands. And time is money times 2.
If you are not young, it is not that investment is not an option anymore. But to stay on the safe side and to keep your money working for you, get insured in the first place.
And when it comes to mandatory insurances like Auto insurance in the US and Canada, you have no other option, do you?
So, no matter what your age and needs you should understand the difference between investing, getting insured, and just wasting away your money.
If you are looking for a way to invest rather than getting insured, here are some things that you may need to consider:
I) Consider liquidity
You waste less money when you invest because it is liquid with the help of which you can easily convert money into more money or vice versa.
Insurance on the other hand is not liquid at all, as you can’t really sell your insurance policy to somebody else.
II) Find the right amount
You can invest a large sum of money, but you should preferably prepare to lose all of it if you are investing in the stock market. And you can’t buy just 5 stocks and keep on getting back your losses. You need a decent amount to start with.
III) Set a limit for yourself
Investing in stocks is always exposed to risk which is why a person who does it must be ready to lose their money at any time because as you know “there’s no win button here”. And if they don’t want to be exposed, they should set up some limits for themselves.
For example, you can set a limit, while investing in the stock market, of how much losses you can take in a month, but with insurance, no such limits exist. So, that’s the main difference between the two.
IV) Do more research
If you want to invest in stocks, you must research a lot more than those who are getting insured. This is because stocks are not the same for everyone, and it is not just a matter of picking the best one out of all the options.
There are many other factors that may affect the stock price like company’s performance, new products being launched, etc. So, when it comes to investing in stocks, carry out as much research as possible and make sure that you don’t make any mistakes.
You should always remember that insurance and investment are two different things, but they both have the same fundamental property. Life is a property, investment is a property, and even health is a property.
Taking into consideration everything written above, should you invest in the stock market? If yes, why? And, if no, why not?
If yes, and if you want to grow wealthy by investing, then do it because when it comes to investment there is no other way out of it as compared to how much one can grow by getting insured. And if your gains are big enough for your future needs, then get insured because it will save your money from being carried away by predators like ‘sharks and hyenas ‘(The words ‘sharks and hyenas’ are referred only to the money-hunters in an unpleasant, secret way).
Or else, always be insured because someday you will need it and that’s the truth!
Are you an investor, and prepared for risk?
If yes, that is great. It really doesn’t make sense to get lost from your money when there is a lot of money up for grabs if you play smart enough. But if no, then still consider getting insured. Why would anyone who wants to live happily with their family, want to potentially lose his/her hard-earned money?