Investment vs. Savings: Which One Has a Better Return?
17 October 2022Although both saving and investing are crucial to establishing a stable financial future, they serve different purposes. While it's true that doing both saving and investing may help you become financially set for the future, consumers should be aware of the differences between the two and the scenarios in which one is preferable to the other.
The terms savings and investment are sometimes used interchangeably, particularly by inexperienced investors. However, these items serve quite distinct functions in your overall financial plan and on your balance sheet and should be treated as such. Making sure that you fully understand this concept is crucial before embarking on the road to financial independence.
Similarities and Differences Between Savings and Investment
Want to know whether to save or invest? If you're interested in learning how to save money and make investments, this guide is for you. To start, below are some of the key similarities and differences between the two:
What makes them similar?
Although saving and investing are quite different in many ways, they both serve the same overarching purpose-- and that is to help you build wealth. There is a lot of overlap between the two since they both involve putting money away for things in the future like expenses, emergencies, and unforeseen needs.
Both saving and investing may help you achieve long-term objectives like paying for your child's college education or securing your retirement through an emergency fund, as well as providing you with a cushion against inflation and the costs associated with significant life events like buying a house or having a baby.
Investing/Saving: How are they different?
The main distinction between these two is that saving money lets you withdraw money from a money market account or bank account in a more convenient way, helping you to be prepared for whatever life throws at you.
Investing, on the other hand, is different since it entails placing one's money in the hopes that it will rise in value. Common investment vehicles include stocks, bonds, mutual funds, dollar accounts, and real estate. In the same way that it takes time for a seed to develop into a tree, it will take a few years for your investments to start yielding a financial return. Plus, you'll encounter a few risks here and there that need to be dealt with.
The Pros and Cons to Save Money and Getting an Investment
Now that you know the differences between the two, it's now time for us to determine their benefits and downsides.
When creating a savings account
There are several upsides to having savings accounts or money market accounts. One benefit of saving accounts is that you may quickly and easily access your cash on hand from your financial institution. Saving money is a more realistic alternative if you want to attain a short-term goal within a certain time period, like flying to Europe next year, paying a high-interest debt, or purchasing a signature handbag within the next six months. Also, the federal deposit insurance corporation or Banko Sentral ng Pilipinas has insurance of up to Php 500, 000 that will not let you lose all your money from your bank accounts.
But there are drawbacks to this approach. Because of inflation, the purchasing power of your currency will dwindle over time. The bank may provide interest rates, but these pitiful sums aren't enough to combat inflation from your regular savings account.
In getting an investment
Investing is an excellent practice to adopt if you want to see your wealth grow more quickly than it would from savings alone. In fact, if the economy seems promising, your investment will pay off handsomely.
However, there are dangers, including the state of the economy both locally and globally, the competence of the fund managers and brokers, and the standing of the firms in which you have invested. Stocks, mutual funds, and bonds are all susceptible to these factors that make it possible for you to lose money.
Types of Investments to Have in PH
If you want to put your money to work and grow it, investing is a good option. If you invest wisely, your money might grow in value at a faster rate than the rate of inflation.
After weighing the benefits of investing vs those of saving, you may be thinking what kinds of investment and insurance products would be best for you. Although there is no shortage of investment firms from which to choose, researching each one's services is essential before making a final decision for your investment objectives. Some of the most fundamental investing options in the Philippines are as follows:
Bonds
Bonds are a kind of debt security in which investors lend money to a corporation or government for a certain length of time. The guaranteed interest rate is an opportunity for financial gain as you will get your initial investment back when the bond matures.
Mutual Funds
The term "mutual fund" is used to describe a pool of money owned by many people. The gathered funds will be invested by a fund management in various securities such as stocks, bonds, and equities.
Stock Market
Shares of ownership in a company are called "stocks." Purchasing stock gives you ownership of a portion of a company. You may profit from selling it now, or you can wait for its value to improve over the next several years and buy it at a higher price. Dividends, which a firm pays out to its shareholders, are another way to bring in money.
Real Estate
The value of most types of real estate, from single-family homes and vacant lots to apartment complexes and farmland, rises steadily over time, making them excellent long-term investments.
Lumina Homes, a Perfect Long-term and Sustainable Investment for Your Future
Regardless how long or how recently you've been working on your financial position, you may find it difficult to understand when you should save and when you should invest. Nevertheless, it's up to you to determine if saving or investing would help you more toward your financial goals since there are situations in which one is preferable to the other.
If you want a bigger return on your hard-earned money with lesser risks, then buying a house and lot in the Philippines is an excellent match for you! You can even have your savings simultaneously through your monthly amortization and downpayment.
Getting an affordable house and lot for sale in a high-potential economic development location is great as you can purchase your real estate property at a cheaper price and can get higher returns as time goes by.
Lumina Homes, a leading housing segment from Vista Land, offer the best deals in the real estate market nowadays which are ideal for any type of individual, couple, or family.
Our affordable house and lot are located in 50 key cities and municipalities all over the country close to major facilities, infrastructures, business centers, and main roads and thoroughfares--providing easy and quick access to our homes for existing residents and potential buyers of our properties.
Start investing now in this sustainable community and witness your money grow throughout the years with Lumina Homes!
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