| Home | Free Articles for Your Site | Submit an Article | Advertise | Link to Us | Search | Contact Us |
This site is an archive of old articles

    SEARCH ARTICLES
    Custom Search


vertical line

Article Surfing Archive



Saving Versus Investing - Articles Surfing


In simple economies, there is little distinction between savings and investments. One saves by reducing present consumption, while he invests in the hope of increasing future consumption.

Therefore, a fisherman who spares a fish for the next catch reduces his present consumption in the hope of increasing it in the future.

Most of the people probably have savings accounts with ATMs to access their hard-earned cash and be able to store away any extra cash in a place a little safer than a mattress. A few of you may even have some stocks or bonds.

Let me explain why while a savings account in the bank may seem like a safer place than the mattress to store your money, in the long-term it is a losing proposition!

If you open a savings account at the bank, they will pay you interest on your savings. So you think that your savings are guaranteed to grow and that makes you feel extremely good!

But wait until you see what inflation will do to your investment in the long-term!

The bank may pay you 5 percent interest a year on your money, if inflation is at 4 percent though, your investment is only growing at a mere 1 percent annually.

Saving and investing are often used interchangeably, but they are quite different!

Saving is storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies.

Typically, you earn a low, fixed rate of return and can withdraw your money easily.

Investing is taking a risk with a portion of your savings such as by buying stocks or bonds, in hopes of realizing higher long-term returns.

Unlike bank savings, stocks and bonds over the long term have returned enough to outpace inflation, but they also decline in value from time to time.

The rate of returns and risk for savings are often lower than for other forms of investment.

Return is the income from an investment.

Risk is the uncertainty that you will receive an expected return and preservation of capital.

Savings are also usually more liquid. That is, you may quickly and easily convert your investment to cash.

The decision about which investment to choose is influenced by factors such as yield, risk, and liquidity.

Investments may produce current income while you own the investment through the payment of interest, dividends or rent payments.

When you sell an investment for more than its purchase price, the profit is known as a capital gain, also called growth or capital appreciation.

Submitted by:

I. E. C. Haramis

Ioannis - Evangelos C. Haramis

I. E. C. Haramis I was born in Athens, Greece and I studied Business Administration, Marketing and Economics in Greece, in U.S.A. and in Belgium.

I am active in the stock markets as an investor, stockbroker and consultant to individual investors and various funds.

I am the publisher and editor of the "Learn to Invest" http://www.GreekShares.com web site and the author of the "Stock Market Guide to Profitable Investments" book.

Since 2002 I am also the New Business Development Director at an Investment Bank.



        RELATED SITES






https://articlesurfing.org/business_and_finance/saving_versus_investing.html

Copyright © 1995 - Photius Coutsoukis (All Rights Reserved).










ARTICLE CATEGORIES

Aging
Arts and Crafts
Auto and Trucks
Automotive
Business
Business and Finance
Cancer Survival
Career
Classifieds
Computers and Internet
Computers and Technology
Cooking
Culture
Education
Education #2
Entertainment
Etiquette
Family
Finances
Food and Drink
Food and Drink B
Gadgets and Gizmos
Gardening
Health
Hobbies
Home Improvement
Home Management
Humor
Internet
Jobs
Kids and Teens
Learning Languages
Leadership
Legal
Legal B
Marketing
Marketing B
Medical Business
Medicines and Remedies
Music and Movies
Online Business
Opinions
Parenting
Parenting B
Pets
Pets and Animals
Poetry
Politics
Politics and Government
Real Estate
Recreation
Recreation and Sports
Science
Self Help
Self Improvement
Short Stories
Site Promotion
Society
Sports
Travel and Leisure
Travel Part B
Web Development
Wellness, Fitness and Diet
World Affairs
Writing
Writing B