Wednesday, October 13, 2010

Saving vs Investing….

There is not much difference between saving and investing…it’s just the thin line. But yet we can’t say it’s the same.

Saving is for our own security where as investing is for our growth financially. Saving is more of storing money safely for our immediate and upcoming expenses. For e.g. keeping money in banks, FDs, products where there are fixed rate of returns and where even the returns guaranteed. So we always have savings in interest – bearing accounts that are safe.

Savings work like an insurance against emergency requirements. It makes you feel secured. While we save we even prevent it from any loss though the growth would be less but its more secured and works as a backbone to the family. Savings would be where we might earn low or at a fixed rate and where in we can withdraw it easily.

Investing would work more towards growth and long term goals with a good risk taking appetite. Usually investing in Stocks, MF`s for long term can give very good returns, but at the same time it has its own risks attached to it, risk is even of losing your principal if not monitored properly. As I keep saying it would have its own pros and cons. Investing also has the power of compounding, where as in savings that is not that good.

While deciding where to invest for short term, one has to be very careful and weigh several factors right from amount of money you want to, time frame….

Before you plan your savings and investments, you need to keep aside x amount for all the unseen circumstances one might face in the next 2 months. Everyone has a different take on these things, especially when it comes to their own money. Important is how, when and where you save. Be it long term or short term, exercise over the risk appetite and requirement gauge for the next 6 months is a must…

“Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years. “

Warren Buffett


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