DIFFERENCE BETWEEN SAVING AND INVESTING
· Saving is termed when money is easily accessible and is without any risk.
· However, holding money in saving is suitable only for immediate or unexpected needs.
· The saved money has the potential to generate higher returns for reaching other financial goals faster.
· This will also mean that the money that has to be set aside from current income will come down, since the returns will add to the corpus being created for future needs.
· This freed income can also be used to meet other goals or improve quality of life.
· To enhance the earning capacity of the saved money, it must be consciously invested.
· Investments provide higher returns, with the risk of lower liquidity and fluctuating values.
· These risks can be managed by aligning the appropriate investment horizon for the considered products with the time frame of the individual goals.
· The emergency and immediate funds should be held in bank accounts and deposits.
· The ones that are allocated to meet long-term goals should be held in investments that give better returns and whose risk is reduced in the period available.
· Periodic review and modification of investment choices is a must to ensure that they continue to be suitable for the current investment horizon of the goals and preferences.
TRANSITION FROM BEING A SAVER TO AN INVESTOR
A SAVER
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AN INVESTOR
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1.
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Accumulates assets for their lasting value
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Recognises assets as having economic value
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2.
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Selling an acquired property is sacrilege
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Selling a property is realizing its value
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3.
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Focusses on outcome of the money
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Focusses on processes money goes through
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4.
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Focusses on the safety of principal
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Focusses on risk-return of deployed money
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5.
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Is satisfied even if the return is undefined
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Seeks information and quality of promises
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6.
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Does not recognize the power of money
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Seeks efficient use of capital
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7.
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Is not bothered if money remains idle
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Puts money to work for its growth
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8.
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Overstates the complexity of investing
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Sees the merits of asset allocation
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9.
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Is lured by bargains and immediate savings
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Combines return, risk, liquidity and period
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10.
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Likes icons and views things ideally
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Makes informed choices and owns his actions
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