Savings and Investments: Read on to understand the difference!

India Infoline News Service | Mumbai | December 23, 2015 10:54 IST

The simple difference is that savings give you a chance preserve money probably in safe custody whereby returns are not expected and from where once can access it at will.

There are two terms that are used interchangeably, ‘savings’ and ‘investments’ in the simple reasoning that they mean the same. But practically they are not, and they serve different purposes. The simple difference is that savings give you a chance preserve money probably in safe custody whereby returns are not expected and from where once can access it at will. On the other hand, investing is more or less allowing growth of money over a period with expectations of better returns.
 
Principle differences between savings and investments
 
Financial schemes used
 
In common scenarios, savings employ the use of savings or current accounts whose money essentially earns negligible returns in the form of interest. At the same time, it is risk-free.
 
Investments involve mutual funds, stocks and gold among others. The returns are determined by the Company’s performance, prevailing market conditions as well as the general economic outlook hence it carries all the risk.
 
Access Period
 
Principle savings have easy access, unlike investments whose short-term return risk fluctuating. However, the long-term returns are better compared to savings even though they are not certain considering the earlier mentioned determinants.
 
For example; in a certain year, the market could produce booming business but in another period of three years there are significant losses in the market.
 
Liquidity
 
Saving’s liquidation cannot be compared to that of investments. It is easier because of the luxury of immediate withdrawal unlike withdrawing investments the likes of mutual funds and stocks that takes a couple of days. 
 
That said it was therefore important to note the following
  • Make room for a good analysis of the nature of the amount and purpose before making a decision to either tuck it away as an investment or as savings.  More often than not Investments are made from the extras that come after meeting the necessary expenses.
  • Long-term Investment requires identification of the right stocks and property to invest. Hence, consultation with experts is considerable good
 
All said and done and if you are not a person of the stock markets and equity funds you can consider such like government securities, bond funds, and high-grade corporate bonds. However, be ready to accommodate the marginal risks that come along. 
 

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