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Saving VS Investing

UserPost

2:08 pm
September 2, 2014


renaudgagne

Member

posts 14

Post edited 2:11 pm – September 2, 2014 by renaudgagne


Hi everyone! This is my very first post here and I would like your insights.

There seems to be a lot of confusion regarding savings and investing.

For example, most people save their retirement money in investment products such as mutual funds.

And we know that the Stock Market looks more like a SixFlags amusement park than a safe haven.

 

What is the purpose of Saving?

What is the purpose of Investing?

Where do you draw the line between those 2?

1:28 pm
September 3, 2014


Invest Four More

Greeley CO

Member

posts 9

I think the purpose of saving is so that you have money to invest.  I personally invest in real estate, not the stock market.  You can invest in many things like your own business, bonds etc.  It makes it very hard to ever invest if you can't save.  

Real Estate investing, Fix and Flips, Rental Properties and Becoming a Real Estate Agent

http://www.investfourmore.com

3:23 am
September 4, 2014


Derek@LifeAndMyFinances

Member

posts 1298

Simple. Saving is for the short term, investing is for the long term. You need to have savings for emergencies and unplanned events, but investing is mostly for aiding a fancy retirement. :)

Derek @ Life And My Finances 

Website: http://www.LifeAndMyFinances.com

Twitter: http://twitter.com/LAMFinances

Email: derek@lifeandmyfinances.com

12:26 pm
September 4, 2014


Funancials

Member

posts 345

renaudgagne said:

Hi everyone! This is my very first post here and I would like your insights.

There seems to be a lot of confusion regarding savings and investing.

For example, most people save their retirement money in investment products such as mutual funds.

And we know that the Stock Market looks more like a SixFlags amusement park than a safe haven.

What is the purpose of Saving?

What is the purpose of Investing?

Where do you draw the line between those 2?

Renaud,

Saving and investing are 2 separate actions. In your example, people do not "save" their retirement money in investment products such as mutual funds. People earn wages and use these wages to consume. If they choose to delay consumption, they are "saving." Savings is the difference between what is earned and what is spent. 

Just as you can work for money, money can also work for you – this is "investing." Rather than buying consumable goods and services (we'll call them liabilities), you can buy assets. Stocks, bonds, real estate, previous metals, etc. There are a number of different places you can invest, but the intent is for your money to multiply. If you buy real estate, this happens through rent payments and appreciation of the property. If you buy stocks, this happens through dividends and appreciation. 

So, to answer your question – there is a clear line between the two. One (saving) typically leads to the other (investing). If you save, but do not invest then your money will erode thanks to inflation (I know you understand inflation because I looked at your blog). This leads me to a question for you:

"I personally will never invest where I can't have my principal guaranteed." 

Care to explain your reasoning?

Name: Hunter (aka A. Blinkin)

website: Funancials (funancials.biz)

twitter: @funancials

email: funancials@gmail.com

5:58 pm
September 8, 2014


renaudgagne

Member

posts 14

Funancials said:

"I personally will never invest where I can't have my principal guaranteed." 

Care to explain your reasoning?

Thank you for pointing it out. The Richest Man in Babylon is my inspiration for this belief.

 

For example, hard money lenders have their principal guaranteed by a collateral. If something goes wrong, the hard money lender can get his principal back.

 

Now, I may have over-stated. I think it is reasonable to have a riskier part of your portfolio where you are willing to lose in exchange for bigger gains (for example investing in start-up businesses) but that money is not my retirement money.

I still think that the best way to get rich is not to lose money.  

7:09 am
September 17, 2014


Financial Samurai

Admin

posts 1803

I've tried to tackle the saving/paying down debt and investing conundrum with my post, FS-DAIR. Check it out. It's a pretty simple to use chart that I created based on historical stock market and debt market returns. 

Regards,

 

Sam

Financial Samurai - Helping you achieve financial freedom sooner, rather than later.

Yakezie Network Founder 

8:10 am
September 19, 2014


James Martin

townsville,qld

Member

posts 38

I think, savings are usually put into the safest places or products that allow you access to your money at any time. Examples include savings accounts, checking accounts, and certificates of deposit.

 

When you talk about nvestment then you have a greater chance of losing your money than when you save. Unlike FDIC-insured deposits, the money you invest in securities, mutual funds, and other similar investments is not federally insured.

12:51 pm
November 13, 2014


moneystepper

Member

posts 182

The simpliest way I would try to explain it is:

"Saving" is for the short-term (any cash which shall be used in the next 0-5 years). This will be held in no to low risk assets.

"Investing" is a long-term assignment of capital to assets which will be more risky, but provide better returns in a time period of over 5-8 years (depending on investments).

 

Many "savings" will turn into investments (such as the purchase of real-estate) but until it is assigned to the longer-term assets, it should be referred to and managed as savings.

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