We often use Savings and Investing interchangably in talks bout Money. But, are they same? Come let’s explore them.
Savings: The Foundation of Financial Security
Savings simply means that portion of our Networth/Income/Portfolio on which we do not want to take any risk of losing its value because of market fluctuations. Basically, it means preserving the money whether it grows or not, that’s not the concern. So, the returns will automtically be lower in this case, as the thumb rule of finance says,
“The lower the risk, The Lower the Return will be.
And Higher the risk, Higher the Return can be.”
It is evident that we will keep our Emergency Funds, Around-the-Corner Goals, ( it basically means goals that are about to come),etc. as our savings not all the money. There are some following points that should be taken inot consideration while doing Savings :-
- Liquidity: Making them easily accessible whenever needed or can be converted into cash in need.
- Do not Invest: Do not even think to Invest the money saved for above mentioned reasons. We will cover later which money to invest.
- Do not put them into some locking Scheme: Providing returns after a duration of time as we will not be able to access the money in need.
Investing: A Way to Generate Wealth
Investing basically means putting one’s money to work with the expectation of earning a return that should beat inflation, it helps in growing wealth over time. Here’s why investing is considered crucial for long-term wealth growth:
- Potential of Higher Returns: Investing in assets like stocks, bonds, and real estate has the potential to generate higher returns compared to traditional savings accounts.
- Long-Term Goals: Investing is ideal for long-term goals, such as retirement or purchasing a home after 6 years.
- Diversification: Properly diversified investment portfolios spread risk and can be less volatile than individual assets. Diversification ensures investor’s wealth is hedged and is available in any market environment.
- Beating Inflation: Investing over long term helps your money grow more than the rate of inflation, preserving its purchasing power over time.
Which money to Save & Which one to Invest ?
This is very very personal question and totally depends onto your Profile (Your Income, your loans, your Expenses, your Goals and many more things), That’s when the role of the people like us comes, who allocate your money to different assets ensuring your all needs and pieces in play.
Conclusion:-
Savings and investing are not same, when used together, can help investors grow their wealth safely. Remember that the key to financial success is patience, discipline, and continuous learning. Do not hesitate to meet Financial advisor, in case you think you need one.
Happy Investing from meriSIP.com team.
