Saving money versus Investing money

Saving money and investing money are entirely different things and fundamentally different financial concepts. They serve different purposes and play different roles in your journey to building wealth and financial independence through Malaysia property investment.

Definitions
Saving money is the process of putting cash aside and parking it in a no-risk and liquid securities of accounts. This can be savings accounts of current accounts. The defining feature of savings is that the cash reserves must be there when you need them. They must be available to grab, take hold of, and put to use immediately with minimal delay and repercussions. Your primary consideration for money should be capital preservation.

Investing money is the use of your money as capital to buy assets with good probability of generating safe and acceptable rate of return (or return on investment) over a period of time. Although this might suffer from volatility and elephantine economic uncertainty, it helps makes you wealthier in the long run. Your primary consideration is that your investments need to be backed by some sort of margin of safety. These can be in the form of stocks, bonds and real estate.

Short term vs long term
Saving money achieves short-term goals in the near-future. They are typically for smaller purchases, such as for going on dream vacations or having money set aside in an emergency fund.

Investing money helps you achieve bigger, more long-term goals. It also helps you build long-term wealth. Think of things like saving for retirement, or your child’s university education.

Accessibility
Savings can be accessed any time you need it. Although many savings accounts have a limit of how much and how often you can take your money out, you cash is liquid and readily accessible.

Investments are not as easy to access. Once you have made an investment with your money, your money it is tied up for a period of time. If it is something physical, such as a house or art collection, you won’t get cash until you sell off your assets, which could take up an innumerable amount of time.

Risks
Savings accounts generally has minimal or no risk. Your funds are insured and safe. If anything ever happens to the bank (which is highly unlikely), your money is safe and sound.

Investments on the other hand, have a higher risk. Stocks and bonds are high-risk investment vehicles that offer the potential for high returns. The downside? You may lose some or all of the money you have invested. Real estate investments having the lowest risk involved and you can look into Malaysia property investment.

Potential for profits
Savings accounts generally earn lower interests. Low interest rates mean low returns. If you are considering leaving your money sitting in an account for more than a few months, you may want to consider other types of accounts. You can do more with your savings by putting it in a fixed deposit account with slightly higher interest rates. However, do be wary that if you withdraw any money from the fixed deposit account before the maturity date, depending on when you withdraw it, you may lose further interest lost. Furthermore, the interests generated will still be substantially lower compared to other investment vehicles.

Investments have the potential to generate high rates of return. Furthermore, you have multiple investment vehicles to choose from. The key to a successful investment portfolio is a diverse portfolio. Your investments will earn money through interest, dividends and capital gains. Your investments may appreciate in value over time, depending on if they are able to outpace inflation. Your investments thus positively increase your net worth. If you have an exit strategy in plan and sell for a higher price than you initially invested, you will end up making a profit.