Saving Vs Investment
Although savings and
investment can be used for meeting various expenses in life, there are some
major differences between them. Here's throwing light on some of them.
Come month end, and
it is time to decide what you want to do with the money leftover after paying
off all the expenses. You would typically have two options: you can either save
it or invest it. Many people wrongly assume that both the concepts are same.
However, there are some major differences between the two. Let us understand
these two concepts in detail.
Meaning
Saving money means
keeping aside a part of your income regularly in order to deal with unexpected
expenses. Investment means putting your saved money in various products in
order to earn returns and grow your wealth.
Time
Savings are usually
used to meet your short term needs. People save in order to deal with emergency
situations and meet unexpected expenses. However, investment generally entails
a longer horizon of six months or more. It is designed to provide returns and
grow your money over a period of time.
Risk
and reward
Another difference
between savings and investment is the risk they bear and returns they offer.
While savings stored in a safety vault are very safe, they will not generate
any returns over the years. Even if money is kept in a savings account, it will
provide a negligible rate of return. On the other hand, money invested in
various products like stocks, mutual funds, gold, etc. is subject to more
risks, but has the potential to grow over time. If invested wisely, your money
can grow manifold over years.
Liquidity
When it comes to
liquidity, your savings are the most liquid assets, as they can be accessed at
any time. However, this is not the case with investments. It takes a few days
for the money to reach your bank account after you decide to sell your
investments.
So
having known the difference between savings and investment, it is important
that ever person judiciously goes for investment to generate wealth for long
run and have savings also to meet contingencies and short term needs
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