Editor’s note: A previous version of this newsletter sent out on July 31, 2018, contained an outdated column. This is the correct version.

I recently found the simplest-ever guide to investing. It’s an infographic that covers all the basics in a clear, totally accessible way. You’ll love it if you’re a beginner, and you’ll admire its clarity if you’re an investing vet.

The best thing about this guide isn’t its simplicity, though. No, the real value here is in how it explains one of the most crucial yet most often misunderstood concepts of personal finance – the difference between saving and investing.

This guide and I are in complete agreement – money you’ll need within five years is savings and thus should be kept safe. Money you can let lie for five to 10 or more years can be invested, which means exposing it to risk in order to earn higher returns than you can get on savings.

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We’ve been riding a long bull market for stocks and seen a lot of money made in areas like real estate, cannabis stocks and cryptocurrencies. It’s natural to want to tap into this wealth creation as much as possible with your own money. But if your time horizon is less than five years, there’s a strong chance you could lose money instead of growing it. Between five and 10 years is a grey zone – let your personal feelings about risk guide you in choosing whether to save or invest.

Here are three situations where you’re more likely a saver than an investor:

  • You’re building a down payment for a home: Houses are darned expensive these days. Can you really afford to risk your down payment money in a stock market that could post double-digit percentage losses in a very short period of time?
  • You’re a temporary worker: If you work contract to contract, you’ll need some cash parked safely to cover rent and other expenses if there’s a period when you’re not employed.
  • You’re building an emergency fund: Your priority for this money is to keep it safe and intact more than it is to grow it.

Savings are best kept in a no-fee high interest savings account, where returns top out in the 2 to 2.3 per cent range.

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Rob’s personal finance reading list…

Wedding day regrets

A collection of answers to a question posed on Reddit: What’s the one thing you regret doing for your wedding day? Answers range from not getting enough pictures taken to not spending on paper invitations.

The strongest case ever for index investing

Here’s a transcript of a podcast on low-cost index investing that features some top investing minds. For Canadian investors, exchange-traded funds offer the easiest, most cost-effective way to invest in major stock and bond indexes.

On the cheap and decorator-approved

Nine tips for jazzing up your home without spending a lot. This list includes ideas like adding new handles to your drawers and using bright paint colours strategically.

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The upper-middle-class welfare state

That’s the phrase the ever-sharp Washington Post columnist Helaine Olen uses to describe how well-off families are able to help their young adult children. This might include providing them with rent money or covering their cell phone and Netflix bills. Ms. Olen was commenting on the anger directed at a recent blog post (featured in a recent newsletter) about a young woman who was supposedly surviving in New York City with a job paying $25 per hour. Ms. Olen’s point is that getting mad at privileged young people living the good life means taking our eyes off the more serious problem of why young adults are sometimes having trouble in today’s economy.

Today’s financial tool

The Better Dwelling website is one of my go-to resources for finding out what’s happening in real estate and debt levels.

Ask Rob

Q: “I’m a self-taught successful investor and saver, and for 30 years I’ve done extensive reading and researching as my hobby. Several family members have asked me to assist in managing their finances. I have been an executor for a few estates, and currently I am a power of attorney for property for my aged mother. I’d like to assist a friend or two with investing, but I feel I should get a legal waiver to protect me if/when their investment inevitably suffers a loss. What waiver forms might offer protection? Would I need to see a lawyer to create such a form?”

A: “It’s not often I get a question I’ve never heard before. This isn’t to say you’re not asking a good question. It’s just that I’ve heard from probably hundreds of people over the years who help others with investing, and none has raised the issue of protecting themselves with a waiver. I’ve never come across such a waiver form, so I guess a lawyer is your logical next step if you want to pursue this. You say you want to ‘assist’ friends. If that means helping friends while leaving final decisions to them, I think you’ll be fine without the waiver. Glad to receive any opinions others might have on this question.”

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

What I’ve been writing about

  • Your money anxieties explained in three words: Pitiful income growth
  • A tax-smart way to get the U.S. stock market into your TFSA (for Globe Unlimited subscribers)
  • Not all online brokers are friendly to investors holding cash (for Globe Unlimited subscribers)

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