Saving and investing are often passed on as the same thing by many. No doubt, both terms are closely related to each other. But, realizing the difference between them will make a world of difference to one’s fortune.
Let’s take an easy example:
Arun regularly puts a part of his income aside in a safe corner of his house or in a bank deposit. After ten years, he accumulates Rs 10 lakhs. That is his saving. Considering the impact of inflation, the value of Rs 10 lakh is not going to be the same after 10 years. Not putting money to any effective use will in fact depreciate the value of your money. Varun, on the other hand, chose to put his money into stocks, equity and debt mutual funds, gold, or even fixed deposits. Here, he is putting his money at work. This is called investing.
Assuming Varun is getting an 8% CAGR return, the value of this Rs 10 lakh would become Rs 22 lakh after 10 years. Here, the disciplined investment approach has appreciated the value of your money for Varun. To accumulate wealth over a long period, it is necessary to put money at work. Investment does this for you. Let’s say having a machine is not enough, you have to start operating it to generate production. Money is that machine. And, investment is the production process that helps you to generate wealth. Having cleared the concept.
let us understand the difference between the two: Savings
1. Hard cash or the amount that lies at your bank or in your bank account.
2. Saving carries the inflation risk.
It depreciates the value of your money. Things you could buy in Rs 100 five years back, can not be purchased in the same quantity now.
3. Savings can help you to meet short-term goals such as going on a vacation or buying a phone.
Investment 1 Saving, when put at work, becomes an investment 2 Investment appreciates the value of your money. Helps to maintain the lifestyle by minimizing the impact of inflation 3 Investing money helps you meet long-term goals like buying a house To create wealth, you need to invest in instruments where the rate of return is higher than the rate of inflation. For that, equity investment is the best option available for an investor.
Role of TejiMandi:
TejiMandi is a Sebi-Registered Research Analyst platform that works extensively to make you a better investor. We are focused on removing the hurdles that tie down an investor. We offer investment ideas in the stock market at a nominal fee. These ideas go through a rigorous scanning process and they are backed by thorough research. This process-oriented approach helps investors to get effective advice, enable them to create sustainable wealth over a course of time.
