We must understand that saving and investing are different. The definition of saving is saving the money you have to meet short-term needs that can be withdrawn at any time. While the notion of investment is a process of developing money whose goal is for the long term.
The basic and important keyword that distinguishes between saving and investing is the risk factor. The purpose of saving which is only used in the short term makes it a lower risk factor than investment practices.
For example, when you save using ordinary savings in the bank, you only have a small risk of losing money, but the amount of money will not increase. This is different from the practice of investing in that the profit potential is greater than the amount of money invested when starting.
But on the other hand, the practice of investing also has the potential for considerable losses. This is what makes investing riskier than saving. Let’s discuss further some of the advantages and disadvantages of investing and saving practices.
Advantage and Disadvantage of Invest
The investment target is for the long term in the period of 10 to 20 years. Investments are used to meet future needs that are still far away, such as children’s tuition fees to prepare for retirement funds. You must study carefully the types and risks of investments so that you do not lose.
Investments with low risk include mutual funds and gold. The price of gold is known to tend to rise every year, although only little by little, it remains the choice of many people to invest using this instrument. Gold is considered more suitable for long-term investment.
Another type of investment that has a very high and volatile risk is stocks. This is due to fluctuations in the stock market that always occur every day and will affect the distribution of the results of the shares owned.
Looking at the other side, investing in stocks can also provide the most aggressive and very attractive returns compared to other investment instruments. Investors must monitor the movement of stock prices at any time, the condition of the company’s shares, and also whether there are sentiments that arise.
Advantage and Disadvantage of Save
In contrast to investment, saving is generally done only to save money in preparation for an emergency if at any time you need money in a short time. Saving is done when someone already has a target amount of money to be collected, and then it will be used for a purpose shortly.
For example, use it for a vacation abroad at the end of the year and set aside money to save. The amount of money needed and the money that will be set aside every month should have been determined within a certain deadline so that there is no miscalculation.
Several types of savings can be used by the public, such as conventional savings, hajj savings, term savings, savings for children’s future, and also current accounts. There is even a type of savings that will be used for investment.
This type of savings is done by buying time deposits, in contrast to conventional savings. The difference is that there are conditions that must be met by the customer. These savings only help make it easier for people who want to invest and grow their money, in contrast to saving to save money. From now on you can set aside money to prepare for future financial conditions.
Do Not Be Rush with Financial Matters
All steps that can be used as options to achieve financial independence, such as saving or investing rely on knowledge of two related things. You have to study carefully, especially about the risks you may face. Another important thing is that you have to measure your abilities first before deciding which method to focus on.
You see if your financial condition is still more likely to save, and then save first, or you can save to be able to make investments as mentioned above, then it doesn’t matter. At least you do it based on ability and still avoid the risk of big losses. Never rush into making any decisions, especially when it comes to financial matters. Many cases tell people who are in debt because of investments; you certainly don’t want that to happen.