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    Savings vs Investment

    • 5 min read
    • Last Modified Date: February 6, 2024
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    • You may feel that saving money in the bank is a good strategy to build wealth. While saving is a great idea, it is not a good way to increase wealth. 
    • Although they are not the same, investing and saving are both essential concepts for laying a solid financial foundation.
    • While both can help you in achieving a more comfortable financial future, consumers should understand the differences between Savings vs Investment and when it’s best to save compared to when it’s best to invest. 
    • When someone saves money, they put some aside for future use or emergencies. They do not earn any return in savings. On the other hand, when one invests money, they can achieve their goals and earn a good return.
    • You usually earn less money when you save, but you take on almost no risk. On the other hand, investing gives you the chance to increase your return on investment, but you also take on the risk of loss in order to do so.

    What is Savings?

    • Savings is the act of putting money aside, usually into a bank account, for needs or future expenses.  People save money for emergencies as well as for purchases. 
    • Consider it like putting money into a piggy bank, except you can use a savings account or a certificate of deposit (CD) that earns interest over time in place of a real piggy bank.
    • Saving money is a great way to achieve short-term financial objectives and get ready for unforeseen events like car repairs or medical expenses. Regular savings will help you build up a cushion that will support you during difficult times. Although the interest rates on savings are typically low, your money is still safe because they are low-risk investments.
    • You don’t become wealthy by simply saving all of your earnings. Saving is merely the difference between income and expense. In contrast, investing involves putting some of your savings towards assets in order to build long-term wealth.
    • To increase your chances of making an impressive return, it would be beneficial to carefully combine your savings with investments.

    What is Investing?

    • Investing is the act of buying assets with the intention that they will eventually increase in value and generate substantial returns. But there is risk associated with most investments. It is often said that the higher the risk the higher the returns will be.
    • The best investments come with a margin of safety, usually represented by assets. Stocks, bonds, real estate, and mutual funds are some of the popular investment options.
    • There is currently a wide range of investment products accessible, so there is one that is suitable for every investor. There are options for both high-risk and risk-averse investors. All you need to do is decide what you want to achieve, evaluate the asset, and confirm that your investment objective aligns with it.
    • Real estate is the first thought that comes to the mind for Indian customers when they think of “Investing”. This is because this market area is often seen as a safe choice for investing. But, commercial real estate has gained popularity over time. 
    • Assetmonk is an established alternative investing website that offers opportunities in Chennai, Hyderabad, and Bangalore and provides realistic commercial real estate investment choices like fractional ownership and Real estate structured debts. IRRs range from 14 and 21%.

    Difference Between Investment and Savings

    • The biggest difference between saving and investing is the level of risk taken. You usually earn less money when you save, but you also bear almost no risk.
    • On the other hand, investing gives you the chance to increase your return on investment, but you also run the risk.

    Pros and Cons of Saving

    • Savings has many benefits, including being safe from loss, having cash on hand for purchases and other short-term objectives, and acting as a safety net against unforeseen expenses. 
    • There are, however, certain disadvantages to take into account, such as losing out on potentially larger returns from riskier investments.

    Pros

    • Builds up an emergency fund for unforeseen events
    • Funds short-term goals like buying groceries, a new phone, or going on a vacation,etc.
    • Minimal risk of loss. Savings held at banks are protected and secured.

    Cons

    • Much lower yields
    • May lose out to inflation
    • Opportunity costs when not invested in riskier but higher yielding assets

    Pros and Cons of Investing

    Investing can help you reach long-term financial objectives, like saving for retirement or purchasing a home, and it can potentially yield higher returns than savings accounts. Additionally, through compounding and reinvestment, investing can increase your wealth over time.

    Pros

    • Potential for higher returns than savings
    • Can help you achieve long-term financial goals
    • Diversification can reduce overall risk

    Cons

    • Risk of loss, especially in the short-run
    • Requires discipline and commitment
    • May require longer time horizons

    Savings vs Investment

    SavingInvesting
    MINIMAL RISK. Savings Account balances have no risk of declining.. HIGHER RISK. There are no guarantees when investing; you could lose money, break even, or get a return.
    PREDICTABLE RETURNS. Yields on savings accounts hardly fluctuate since they are not affected by market volatility.FLUCTUATING RETURNS. While investing has the potential to yield high returns, it is subjected to market fluctuations.
    IMMEDIATE ACCESS. It’s as simple as logging onto your bank’s website or visiting a branch to transfer money into or out of your savings account.BARRIERS TO ACCESS. Withdrawing investment gains prematurely may result in penalties, taxes, or both being charged by investment accounts.
    GOOD FOR SHORT-TERM NEEDS. The best place to put emergency funds or cash you’ll need in the next three to five years is a savings account.GOOD FOR LONG-TERM GOALS. Investing is an excellent choice for funding expensive future goals, such as retirement, since it can help you grow money over the long term. 

    Investors at Assetmonk can guarantee an IRR of 17% with a minimum investment of just 10 lakhs in the form of Real estate Structured Debt. It’s an attractive option, especially for senior citizens looking for a steady monthly income, because the minimum investment period is 36 months. The bright side is that investors may be able to claim tax benefits of up to Rs 50,000, even though the interest earned is taxable.

    Why is Investing So Important?

    One can achieve their goals and secure their financial future by investing. Following are a few benefits of investing that highlight why investing is important.

    Earn Good Returns

    Compared to saving, investing can yield higher returns. In favourable market conditions, a variety of investment vehicles can yield substantial returns for investors. One can make their money work for them by investing.

    Reach Financial Goals

    Investing is a means of building wealth. It helps  to secure your future and meet your financial objectives. Having a purpose in mind when investing will encourage consistent contributions and facilitate the achievement of the objective.

    Beat Inflation

    One’s savings can be consumed by inflation, lowering their purchasing power. Simply put, after a year, one rupee will be worth less than it is now. The primary cause of this is inflation. One must make sure their money grows in order to deal with the rising costs. The only way to make this happen is by investing.

    Real Estate Structured Debt: Low-Risk Investment Option for Beginners

    • Investing in real estate can be a lucrative way to build wealth since it offers stability, predictable returns, and lower risk investment options like: real estate structured debt.
    • Real Estate structured debt is a low-risk investment options for beginners which provides fixed-income prospects backed by secured real estate assets with guaranteed exits. It is one of the safest, highest-yield investment plans available in India and a great choice for short-term investments
    • Since returns are predetermined and usually fall between 12% and 20% annually, making it a desirable choice for investors looking for higher fixed returns. 
    • The commercial real estate market is expanding due to demand in major cities; growth is projected to reach a CAGR of 21.20% between 2023 and 2028, and structured debt investments in commercial real estate are emerging as a strategic CRE investment  option for investors, facilitated by notable platforms like Assetmonk.

    Should I Save or Invest?

    • Still wondering whether you should invest or save? The best option really depends on your current financial situation; neither investing nor saving is preferable in all situations.
    • You would be better off keeping the money in a savings account if you are saving for a short-term goal and will need to take it out soon.
    • On the other hand, you will typically discover that investing can help you achieve more satisfying results if your goals are longer-term.

    Conclusion

    Both investing and saving are important components of a sound financial strategy. While investing has the potential for larger long-term returns and can help in achieving long-term financial goals, saving offers a safety net and a means of achieving short-term goals. 

    Every strategy has pros and cons, so it’s important to strike the best balance for your objectives and financial status. In the end, a comprehensive strategy that involves both investing and saving can help increase wealth, safeguard against financial shocks, and lay the foundation for a more secure financial future.

    While investing can be complex, there are easy ways to get started with alternative investment platforms  like Assetmonk.

    Offering value investors both short-term and long-term real estate investment opportunities with significant potential, Assetmonk is a unique alternative investment platform. We specialise in providing personalised advice and carefully selected fixed income investment opportunities backed by real estate and earn high returns.

    Reference Links

    1. Best Investment Options in India to get Higher Returns 
    2. How To Invest 10 Lakhs Rupees For Monthly Income

    FAQ’s

    Q1. Is it better to save or invest for a short-term goal?

    A. It’s advisable choosing to invest your money for long-term financial goals like retirement since you have a longer time frame to recover from market fluctuations. If the financial goal is short term, say five years or less, it’s usually smarter to keep your money in a high-yield savings account.

    Q2. What are the best Investment strategies for beginners?

    A. Alternative investment funds (AIFs) have evolved to be a popular investment strategy for beginners. One alternative investment asset that provides multiple streams of income and fixed, predictable returns is commercial real estate investment. Shops, offices, warehouses, and other commercial properties are secure investments that provide long-term capital growth and consistent rental income.

    Q3. How can investing make you rich?

    A. Investing is a profitable way to manage your finances and potentially grow your wealth. If you choose wisely among your investments, your money might appreciate and outpace inflation.

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