Saving vs Investing; Which is Better?

Being Natural savers, Indians save their hard earned money. Especially House-wives prefer savings by putting some portion of money in Pouches, shelves, cup-boards, wallets. They are specialists in diversifying the saved amount. But is it enough? In Today’s Inflation (Rise in Prices) terms, is it sufficient? Let us first differentiate between “Savings” and “Investments”

Savings– Savings is nothing but putting aside some portion of money idle for future needs. Savings includes diversifying some money in Bank deposits, chit funds etc. The interest amount earned from these instruments are far below the inflation rate.

We don’t mean saving is useless. In fact, Saving 3-6 months of your expenses is mandatory to avoid unforeseen events. Calculate your monthly expenditure and create “Emergency Corpus” of 3-6 months in a bank savings a/c or in a liquid fund(One type of debt mutual fund)

Covid taught us the importance of creating an emergency corpus. There is a saying- “Save for a Rainy Day“, who knows when will the emergency comes? So saving is also essential

But due to inflation concerns, Investing has become a need. To combat with inflation, Investing helps. Let’s first understand what investment means-

Investing– Investing needs some risk-taking. Investing in risky assets like shares, mutual funds, real estate etc beat inflation. In simple words, investing your hard earned money in risky assets would include “Investments”. By taking “Calculated Risk” and estimating the future growth potential, one should “Invest” in these assets.

Why Investments are essential?

Historically shares, real estate, mutual funds have proven track record of beating inflation. As inflation in India is about 7-8%, saving in traditional instruments which offer 3-4% is not a wise decision. Risky assets like shares offer 15-20%, mutual funds offer 12-15% in the long-run. The returns expected from the real estate depends on the location, city, future growth in the surroundings etc.

These 3 (Stocks, Mutual Funds, Real Estate) beat inflation. But there is risk associated with it.

If you are a risk-taking investor invest according to your goals in shares, Real Estate.

If you are a moderate risk-taker, go for Mutual Funds.

But taking calculated risk is essential now-a-days. As Inflation paces faster in India, one should do research on various investment options, watch carefully and after concluding that there is “Worth” in investing, Invest then.

There is a saying- “Early Bird Catches the Worm”. So after doing thorough research, invest immediately. You may loose “Compounding” Power if you make late investments.

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