Saving VS Investing
Which one is better? What is the difference?
Many people tend to confuse these two terms. They are two DIFFERENT financial concepts. The only similarity they have is that they both are critical to achieving your financial goals. They both require you to put money aside, although for different reasons and purposes. What you need to know is that when you SAVE is typically for a short-term financial goal or an emergency, and when you INVEST is for the purpose of long term and anticipate a return. But, why these two require putting money aside at first? In this article we will show you the differences of these two financial terms, and what are the best ways to do it.
Saving.
When you create a budget, you must know if you are earning enough to cover your basic expenses, for example: rent, groceries, monthly loan payments, etc. If you have some money left after all the basics are covered, that’s money you can save. And your savings is typically earmarked for short-term financial goals.
For example, one of the reasons people save is for emergencies, by creating a ‘RAINY DAY’ fund. This fund is usually left in a savings account until needed. But typically, people save in order to buy a new car, house, and to pay for a big loan such as college.
STOP LOSING MONEY TO HIDDEN FEES
WE OFFER FINANCIAL ADVISORY SERVICES ON A FLAT FEE BASIS
Investing.
On the other hand, investing means you are going to get a return of your investing since you are putting your money to work. When you invest in the stock market, it generally means purchasing an asset, it can be a stock, bond or fund. When you purchase a stock, for example, you are buying a small portion of a company. But when you purchase a bond, you are purchasing the debt of a company or a government. When you purchase a fund, you’re acquiring a basket of stocks, bonds, or cash, or possibly all three. Don’t confuse those terminologies since they all mean one different thing!
So, the question is... Why do people invest rather than put their money in savings?
The Two main reasons are: To earn a return like said previously and to keep ahead of inflation.
People generally invest with the hope of earning more money on their investments than they would from putting that money in a savings account.
Saving VS Investing: Which one will you choose?
When you put your money in a savings account, it’s SAFE, the amount of money doesn’t gets bigger or smaller, it’s always the same.—but that doesn’t mean there aren’t risks and downsides. Typically, the Federal Deposit Insurance Corporation (FDIC) will insure up to $250,000 in a bank deposit account, but with certain important restrictions that you must take into consideration.
Savings accounts offer low interest rates. So, if you plan on putting a lot of your money in savings for an extended period, you’ll probably see its value coming down due to inflation.
Additionally, many banks also charge fees for savings and checking accounts, which can further eat into your savings if you don’t put in to your savings
Investing has its risks.
One of the risks of investing in stocks is that some companies may not achieve in creating profit or revenue, or they miss production deadlines, or have a bad quarter, etc. There are many reasons, but its downside is that your investment will lose value. In the case of investing with bonds, they could also lose value, for example, if interest rates go up, or inflation is on the rise. The stock market can also change daily, and with it the value of your assets.
Consider this …
If you deposited $2,000 in a savings account at 3 percent annual interest, it would grow to $3,612 in 20 years (before taxes). The same $2,000 invested in a stock mutual fund earning an average 10 percent a year would grow to $13,455 in 20 years (before taxes).
Making a choice between either saving or investing will depend on your financial goal(s) for the money and your risk tolerance.
Caribbean and Latin American Securities, LLC doing business as Bondwire is a state registered investment adviser located in Miami, FL. Bondwire is registered in the state of Florida and in compliance with the current registration requirements of the states in which Bondwire maintains clients.The views outlined in this presentation are those of Bondwire you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from Bondwire or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed above to your individual situation, you are encouraged to consult with Bondwire or the professional advisor of your choosing. All information, has been obtained from sources believed to be reliable, but Bondwire has not verified its accuracy and does not guarantee its reliability. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for a given client or portfolio.Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of entire principal and potential illiquidity of the investment in a falling market.Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.Any questions regarding the applicability of any specific issue discussed above should be addressed with Bondwire. All information, including that used to compile charts and/or tables, is obtained from sources believed to be reliable, but Bondwire has not verified its accuracy and does not guarantee its reliability. This delivery of this information does not constitute an engagement with Bondwire.The information contained in this presentation is general in nature and offered only for educational purposes.No investment decisions should be based upon this presentations’ contents. Delivery of this information is not a substitute for engaging Bondwire for a personal consultation whereby all of your financial circumstances, risk tolerance and investment objectives can be considered.
FIND OUT WHY BONDWIRE IS DIFFERENT.
What sets us apart is our unique approach in managing your financial life. Over the past years, we have work with best multi-custodial banks, innovative financial technologies and strategies improving the lives of our clients. We want you to feel confident with our well-experienced advisors that will guide you to align your decisions with your ideal life and help you achieve the correct balance in your finances. Remember we are by your side. Want to achieve your financial goals?