Understanding the Differences Between Investment and SavingsMar 5, 2021, 7:29PM
Investments and savings are two common terms in the world of wealth creation, especially in the equity market, that must be distinguished.
Investment and saving are two common terms in the world of wealth creation, especially in the equity market. Either of the two phenomena has their approach to the concept of creating wealth, and they play different roles when creating a financial strategy. It all boils down to what you want to do with your money.
What saving is
Savings involve putting away a certain amount of money you don't want to spend for a period and watching it accumulate over time so that it can finally meet a certain future financial need (e.g. a purchase) or to insure against emergencies. More importantly, it is never risky to save.
Investment and what it is
Investment involves buying up assets and setting them up to yield more earnings as a reward so that your financial power can greatly increase. With investment comes risks, sometimes very high risks, depending on the investment path. However, it’s usually the size of these risks that determine the level or volume of rewards you have as returns.
The most common investment assets are stocks, bonds, real estate, and mutual funds. However, another rewarding investment is forex trading. This type of investment involves the intermediary roles of forex brokers - just like there are brokers in the stock market. One of these forex brokers is Go markets, one of the top licensed MT5 brokers (check go markets review).
What investment does for you
- Money births more money
Investing your money in the forex market for example earns more income for you. If you buy a currency when it's low in value and sell it when the value increases, the profit margin can quite beat your imaginations.
- Save up on taxes
It's a well-known practice that long-term investment grants the benefit of saving more on taxes. The more you invest, over a long period, the less you pay on capital gains tax.
- Compounding looks really good in the long run
Investment often triggers reinvesting. Reinvesting profits yields much more long-term profits. This process is called compounding.
- Staying ahead of your financial needs
Investment done over a long period has the mouthwatering benefit of granting you the financial power to meet all the needs and wants you to have. You can easily purchase anything, from a position far better than those who rely on savings alone. Investing should also be very appealing to young people who might be looking to retire early and want to ensure that their golden years will be stress-free.
To save or to invest?
Saving money doesn't grow your income the way investments do. Sometimes, money that has been saved may not run the gauntlet of inflation and come out unscathed. While saving will only help you store your money in a safe place, investment is the deliberate action you take to make your money grow substantially. Simply put, with investments, you make your money work for you the way you can’t with savings.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.