I have written several articles in the past about how a lot of investors place too much emphasis on chasing returns and not enough on investing more money. Making risky investing decisions or chasing the next hot thing or constantly seeking the ‘perfect’ portfolio, but not a care for strategies on how to save and invest more money.

It is the latter that is far more safe and effective, yet most disregard it. I won’t harp on any more about it today. You can read my previous thoughts here and here. But what I wanted to do was a blog post where the numbers did the talking using a few examples.

Example one: Save $1,800 a month for 20 years and try and earn 7% returns. Save $2,200 a month for 20 years at 6% investment returns.

Even with an investment return of 1% less, saving $400 more a month results in around $78,000 extra over 20 years with these assumptions. There is also no guarantee that the $1,800 a month investor will achieve the 1% higher return either. To replicate the 7% returns, in this example you would just need to invest $2,030 a month at 6% returns. An extra $230 a month to earn the equivalent of 1% higher returns.

Example two: Save $800 a month for 20 years at 7% returns or save $1,000 a month for 6% returns.

You would have an extra $45,000 with 6% investment reruns and saving $1,000 a month versus saving $800 a month at 7% returns. To replicate the 7% returns, in this example you would just need to invest $905 a month at 6% returns. An extra $105 a month to earn the equivalent of 1% higher returns.

Example three: Save $4,000 a month for 20 years at 7% returns or save $4,800 a month for 6% returns.

You would have an extra $133,000 with 6% investment returns and saving $4,800 a month versus saving $4,000 a month at 7% returns. To replicate the 7% returns, in this example you would just need to invest $4,510 a month at 6% returns. An extra $510 a month to earn the equivalent of 1% higher returns.

In all examples, you would need to invest an extra 13% (give or take) to achieve the same returns as investing less but earning 1% higher returns. And remember, the higher returns are far from guaranteed. Just because you are chasing higher returns doesn’t mean you will achieve them. In fact, chasing higher returns is just as likely to result in worse returns than even 6% used in these examples, let alone more than 7%.

Saving more can mean not having to chase higher returns. It can also make up for poor investment decisions.

Investment returns are not completely in your control. Saving more is. Take matters into your own hands.

Don’t make chasing higher returns the default decision like so many others do. Look in house first.

I have added a calculator to the calculator page where you can check your own numbers to see whether you are more comfortable with saving more or chasing higher returns. It is the 7th calculator down on the linked page.

If you need an investment plan or recommendations , then get in touch today.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here