SOMETHING ABOUT INVESTMENT & SAVINGS
INVESTING means, you put your money in any business to make more money. Therefore, we can also say that your money is working for you to make him more and more.
INVESTING is something different from SAVING. Investing is proactive in his nature but on the other side, saving is passive in his nature.
SAVING is focusing on the safety of money and always tries to stay on the safe side in future, in other words you can say SAVING is also an activity to make more money but with not taking a RISK.
In investing, you focus on returns from investment in future in form of cash or cash equivalents. You can also evaluate the return on investment with the desired outcome or the risk, which is associated with the investment.
In saving, you have not to face any risk and have earned some profit after a six periods. Risk is almost not situated with the term saving.
It is a very difficult discussion to explain and to create the difference between investment and saving. These related to each other but investment has some characteristics, which differentiate it from saving. There are many characteristics associated with investment but here we are going to discuss some of them in the context of stock.
CHARACTERISTICS OF INVESTMENTS
1. OWNERSHIP
2. UPSIDE POTENTIAL
3. RISK
OWNERSHIP
When you buy any stock (share), you become an owner of that company of which shares have bought. This ownership will raise same rights and responsibilities towards you. You become the owner of the company at the extent you bought shares and have voting rights when some decision time for that particular company.
The company is under control by you within your ownership percentage and the loss is associated up to that percentage. Dividend distributed to all owners up to their own over a fix interval of time, these dividends distributed from the profit of the company.
Saving raises, no ownership of any instrument and in future only fix profit distributed to account holders. No voting rights are available in savings and you are only owns your account amount.
Upside Potential
In investment, you can enjoy the increase of your investment. This can happen to increase in company profits and value. If the value of the company is increase than the dividends, also increase. The growth and the value of a company are depending on the company’s performance in past years and the coming future years considered in valuing the company.
Saving has no upside potential increase for any instruments or any accounts. Savings remains same over the all targeted periods but investments can grow under the good conditions.
Risk
Risk is always associated with all investments. If there is chance of increase of profits also an equal chance for the loss in the future. If you talk about the potential increase in the value of an investment, here the chance of a decrease in the value of investment lay. The risk of dividends also lay here if the company does not perform well than may be no dividends awarded with investments.
Savings have no risk associated with their value, they remain same over the period but with low risk, low profits are available.
