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Distinction between saving and investing?

Saving is a stage on the way to investing. You cannot be an investor without being a saver but you can be a saver without being an investor. When we talk about savings and saving money, we could be talking about a piggy bank on the mantelpiece or a high interest deposit account. Savings are effectively cash or cash instruments, such as general savings accounts, fixed deposits etc. Investing is what you do with the savings you have created if you are looking to generate a return on your money that is greater than what is already available to you through your savings instruments.

As a saver, you will be taking very few and very small risks with your money. As an investor you are taking a much greater risk. Not only is the return on offer to you likely not to be fixed or guaranteed, the capital sum you invest may be at risk as well.


Why on earth would you want to take such risks? The short answer, of course, is because the potential rewards may be greater and you want to make more money than is possible just by leaving it on deposit in the bank or financial institutions.



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