SAVING AND INVESTMENT- Know the basic differences in brief.
What is Saving?
Savings is the extra part of consumer’s disposable income which is not used for current consumption. It is kept aside for future use. It is kept to meet the emergency requirements or unexpected situations arises. It makes a person financially strong and mentally secure. There are several ways through which a person can save money i.e accumulating it in the form of cash holdings, or depositing it into the savings account, Fixed Deposit, Recurring Deposit or in any other investment fund.
The first step of wealth formation is savings, which is decided by a person’s level of income. The higher the income of a person, the higher is his capacity to save, because higher income increases the propensity to save more and decreases the propensity to consume. The boosting force depends on some factors like his concern or financial background etc.
What is Investment?
The process of investing is to save money to achieve a particular goal. When you purchase an asset with the hope that it will grow and give good returns in the coming years than it is called investment. The present requirement should be foregone to obtain future higher returns. Investing for medium or long term targets like Marriage, Higher Education, Vehicle purchase, House Building, Retirement Planning etc.
The purpose of the investment is the creation of wealth. It can be in the form of capital appreciation, interest earnings, dividend income, rental income or long term passive income. Investment can be made in different ways like Equity Stocks, Bonds, Mutual funds, Commodities, Currency, IPO, Gold, Pension Fund or Annuity or any other securities or assets.
As investment has a risk factor of losing money, but it is also true that you can accumulate more money with proper investment planning.
The major differences between savings and investment are explained:-
Must Read:- SAVINGS AND INVESTMENT- WHICH ONE IS BEST?
The Difference between Savings and Investment in tabulated form.
|Purpose||Emergency fund||Corpus/Wealth creation|
|Duration||Less/Short term goal||Long term goal|
|Liquidity||High Liquidity||Low/Moderate Liquidity|
|Risk||Low Risk||Moderate/High Risk|
Best way to save money – the conclusion.
SAVING AND INVESTMENT- HAPPY READING.
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