Investment Fundamentals- Difference Between Savings and Investments

1 min read

Difference Between Savings and Investments

Most people misconstrue savings and investment. Savings is just setting aside money you won’t spend now for emergencies or future expenditures. Investment is actually buying assets or securities for which you expect a return on these securities. These securities may include: Equity/Stocks, mutual funds or unit trust, bonds, treasury bills, commercial papers, fixed deposits, real estate and the likes. I’d take time to explain some of these. Especially the common ones.

Investment is about taking risk. You may have heard, the higher the risk, the higher the return, which is actually false. The right thing is, the higher the risk, the higher the EXPECTED returns. Thus, with investments you may actually lose your money and that’s why you’re compensated for with the returns you make on your investments.

Thus you need to be extra careful on how you invest and where you invest. Now, let’s move to why you must invest. There's a popular Chinese proverb that says: “The best time to plant a tree was 20 years ago. The second best time is now.” Investing your money will allow it to grow. This return allows your money to compound, earning money on the money already earned and creating wealth over time.

Tags: investment | share | equity |