Saving or Investment
In the previous parts, we have seen the basic terms of the share market. Before we move to the intermediate level, let's understand the difference between saving and investment.
Saving is the process of parking the cash in extremely safe and liquidity securities.
The primary aim is to protect or save the capital, and the secondary aim is to get some return if possible.
No risk involved in saving.
You can earn interest from your saving A/C.
Explore option for saving Money Market A/C, Saving A/C, Certificate of deposits, Bonds.
Investment is the process of putting the money/capital into used for creating wealth over a while.
The primary aim is to earn a high return.
The liquidity is usually not easy.
Explore option for Investment Stock, Mutual Funds, Real Estate, Gold.
How much one should save or invest:
These depend on your requirement. If you want to buy a home, then you should go for an investment which will give a good return in the long run. But always remember one much have saved enough money to cover all the expenses for 6 to 7 months.
As a thumb rule, you should have saved enough money to cover all the expenses like loan payment, bills, etc.
Any specific purpose which requires a huge capital in 5-10 years should be investment-driven.