“Investing is better than saving in any world, every time.”
The above quote clearly justifies the importance and significance of investing. While saving refers to putting your money in a safe locker or bank account with the hope to save it for the future, investing refers to putting your money in growth assets with the goal to increase its value with time. Let’s find out why and how investing is better than saving.
Note: Putting your surplus money in a bank account is NOT investing.
Saving is when you put any surplus money, which remains after spending on personal needs, aside in a separate, non-growing account. Keeping your money in a bank account is not essentially investing, as your money in that account is not likely growing. Why? Because the annual inflation rate is generally higher than the annual interest rate on a traditional bank account. In simple words, your money is depreciating at a higher rate (inflation) than the interest you are receiving.
Investing, on the other hand, means putting your money in a financial product that ideally produces a higher annual return than inflation. So, you know that your money is growing with time.
There are a number of investment products you can invest your money in, depending on your risk appetite and goals. Some investment products such as FDs, gold and bonds are less riskier and produce fixed returns. Other market-linked products such as mutual funds, NPS and stocks can give much higher returns yearly but also have higher risk levels.
There are many other differences between saving and investing. The important thing is to know that your money in a savings account is not likely growing, which means it’s losing its value over time due to inflation. To beat inflation, it is crucial to invest in one or more assets that have a positive return on investment (RoI) rate.
Ideally, you should diversify your money across multiple assets, with different risk levels. Why? To minimize the overall portfolio risk. For example, you can invest some of your money in debt products (FDs, govt bonds, etc.) that have a low risk and some in high-risk equity funds (equity MF and stocks) and some in commodities like gold. This helps ensure that your investment portfolio is always in balance and never at a very high risk. Depending on your particular risk appetite, age and investing goals, you can decide on the percentage of funds that you want to invest in debt, equity, commodities, etc.
There is also a big difference between saving and investing based on the goals/objects. If your goal is just to save money for emergencies, saving is a good option. But, if you are looking to create wealth, investing is a must for you. Investing in the right assets will help you reach the goal of wealth creation.
Another major way saving is different from investing is in terms of liquidity. Saving generally has higher liquidity than investing. For instance, your money in a bank account or a personal safe is much more accessible than the money invested in markets. However, there are also available investing options with a higher liquidity, such as short term mutual funds, gold, etc.
Overall, investing is better than saving in almost every way. For a low risk, you can ensure your money grows with time by putting it in growth assets like stocks or cryptocurrencies.
Cryptocurrencies are a high risk, high reward investment option where you can earn huge in a very low period. However, the risk of losing your money is there, so do your research and learn about cryptocurrencies before investing in it. Libra Coin is a fast-growing digital currency with a high potential to give good returns over time. Find out more and invest at https://libraecosystem.com/