Are you investing or saving money???

Are you investing for future – I would say “Most of you are not investing”!!!

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Sounds strange??? Let me explain saving vs. investing to you.

Now you would say – but I save every month…

But it’s true – most of us are just saving money and not investing…

As Indians we are quite conscious about saving money. Growing up in a middle class Indian family, I too learnt value of saving. It was always about ‘spend less and save as much as you can’. There was never an exact goal to be achieved (rather several goals and no time frame :-( ). Save for retirement, save for child education and marriage, save for illness, save for house/ car, etc… A never ending list of things to save for!!! Where to save – bank FDs or PPF or insurance or post office deposits or NSCs…

In essence no calculations – whether what we are saving would be enough or not for the specific purpose or purposes in future? Would the money be easily available at time of need??

Money is just being saved than being invested with specific focus!

Why – most of us think all other savings instruments are out of reach/ understanding and too risky for a common man. The whole purpose of saving was that you put your money in savings lest you should spend it.

Hence, money was saved and never invested, fetching very low returns!!!

Why to move from saving money to investing?

Saving vs. Investing –

Benefits of investing over saving money

• Focus – Clear view of future needs and required investments help us enjoy our present

• Sufficiency – We are also able to save enough (almost :-) ) for future needs

• Timing – Investments maturing around the requirement time

As we have confidence in our investments, our stress levels go down. Hence, you would need not lead a penny pinching lifestyle.

How to move from Saving to Investing

First let us understand how is investing different from saving –

Goals

Savings – no goals defined/ assessed – whatever left is saved

Investing – goals and timing defined and based on them money is invested

Time frame

Savings – as goals are not defined its not clear when how much money would be required

Investing – goals are fixed and hence time frame is defined (more or less)

Instruments

Savings – risk/ return comparison is not done and hence could lead to very low returns

Investing – risk/ return comparison is done and hence money fetches better returns

4 simple steps to move from saving to investing

1. We should assess our investment goals and time frame for each goal.

2. Educate ourselves to be able to take informed investment decisions

3. Review and compare various financial instruments.

4. Finally, invest wisely to save enough for future without sacrificing too much in present.

   
   

Hence, if we want to reduce current and future stress levels it would best to resort to investing rather than saving!