Saving and investment are two related but different concepts of personal finance. Both are certainly equally important in the journey of financial independence.
Saving refers to setting a part of money aside in safe and liquid accounts for the future. On the other hand, investment implies the purchase of an asset such as stock in a quest to earn good returns ahead.
Although both are important, saving invariably happens prior to an investment. For this, people hold cash reserves for a better future and unexpected emergencies.
Since cash reserves don’t earn anything, people tend to invest a part of that money in stocks, deposits and mutual funds so that they can earn a dividend or interest out of it.
The goal of investing is considered better although investments can be volatile in nature. However, they are undoubtedly better than merely holding cash reserves.
At the outset, one must acquire a thorough knowledge about investing through intensive research before making the first move. It is important to understand the investment markets, trading of shares, different ways of investing, workings of the share market and several other factors before making an investment.
Many people lack adequate information about investment and consider it to be extremely loss-causing and take a step back towards simple savings of money.
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It is the savings that can serve as the capital for one’s investment. Saving is the basis for a financially sustainable future. It is advisable to ensure that all our immediate needs are being taken care of. That can happen if we keep aside at least six months of expenses before investing the remainder of savings to let the money grow.
In this rapidly advancing world, it is imperative to let your money grow in size. So, you must try to expand your financial capacity through investments while making sure that you possess enough savings to step back and start afresh.