With some frequency when talking about the world of money, it is confusing what is to invest and what is to save. It may even have happened to you on more than one occasion. Although they are terms that have a certain link between them, its meaning is not the same. It will be convenient for you to take it into account so that you can better plan your savings and know what products you are targeting. Especially to avoid any kind of confusion.
In addition, we will explain to you which are the most suitable products for each of these strategies. Because you may not know, but they are totally different. Not only in terms of its structure, but also the objectives pursued. In this way, you will begin to have a broader knowledge of what it is really to invest and save.
A first consequence of this knowledge is that you will be in a position to obtain a greater benefit from your assets. Among other things because you will be more clear about what you want and through what strategies. Because normally both terms tend to resemble each other. Even from the specialized media in the world of money and everything that financial products entail.
What is investing?
Investing is trying to get a benefit to a financial operation. Through the products enabled to achieve this purpose. It does not count the time, the amount or the financial assets to which they are directed. It is fundamentally a transaction in the financial markets that can have a very flexible or variable duration. Only a few hours or intended for an excessively long term of stay. No limitations on all these parameters.
El main goal what do you have when you invest your money is to increase your heritage. The more it is, the better it will be for your personal interests. To the extent that an investment can obtain a return on operations of more than 10% in some cases. Even under more profitable margins, depending on the results you obtain in the products where you invest them.
It is not normally a habit to save, but to generate a return to improve your quality of life. Since usually your capital gains are not used to create a savings fund. Neither in the young nor in the old. In many cases they are used to pay for a great trip, have more liquidity in the checking account or face the payment of a small personal whim.
Products intended for investment
Once you have identified what it means to invest, you will have no choice but to know through which products you can channel your savings. As you can see, they are many and of diverse nature. Not only from equities, as you may believe in your original approaches. But also of the fixed and even of other alternatives in investment. It is not only invested through a single financial product.
When talking about investment, one must always refer to financial assets whose prices are quoted on the markets. In this way, and as a consequence of the law of supply and demandwill always vary. Every day and in any of the circumstances. At no time is the price agreed, as is the case with savings models. You will only have to know through which sources you can get it.
The model par excellence for this class of operations is equities. And among it, the buying and selling of shares on the stock market. It is a model with which you are surely used to operating. It represents an opportunity to generate profits for your monetary operations. But with the risk present that you can also lose, and even a lot of money if things do not go as well as you had planned from the beginning. It is characterized because you have alternatives to invest. Indices, sectors or securities of the stock markets. By means of a mechanism that is known to practically all users.
The investment you can also channel it through other products much more aggressive financials. Where your gains can be significantly higher, but also the losses. It is this singular game that is the incentive for a good part of the small and medium investors. Where regularly sometimes you win and other times you lose. It is about admitting the supply of the law and the demand in the equity markets.
The investment can also be made in fixed income through the purchase of bonds, public debt and other products with similar characteristics. Not surprisingly, these financial assets are also listed on financial markets, like equities. It is true that they offer you greater security in open positions. But in exchange for lowering yields significantly. In any case, this part of the investment has a certain link with what the savings.
Through investment funds
Investing in fixed income has a very effective instrument for you to participate in your financial assets. They are mutual funds based on fixed income. They do not guarantee you any fixed returns, and you can even lose money with them. Especially if the scenarios where they move are not the most favorable for their interests. But in any case, they also depend on a listing on the financial markets.
There is a very peculiar characteristic in these products that makes them opt for investment. It is none other than the possibility that you have to diversify it with other financial assets. In the way that seems appropriate since you have investment funds for all tastes and for any investor profile: aggressive, moderate, defensive or intermediate. You will not find limitations in this aspect either.
Because in effect, the main purpose of the funds is investment, not savings. Not in vain, you try to improve your checking account balance through these operations. On the other hand, you have the great advantage that you have a wide range of proposals. Of all kinds, and for any moment in the international economy. As a consequence of this strategy, you will be able to achieve an average return each year of between 5% and 10%.
What is saving?
This operation is distinctly different. It is about creating a savings bag in the medium and long term. Under much more modest returns than will be linked to the price of money. And that will affect that your purchasing power does not prosper as you yourself wanted. It is formalized through savings plans, savings accounts and term deposits, mainly.
A very notable difference with respect to the investment, is that in this case you will always have a guaranteed minimum profitability, no matter how small. It will increase, very slowly, the capital saved in your account. Not surprisingly, it is an operation that younger or older customers are used to through programs to stimulate savings among users. It is one of the models preferred by the most conservative users, who prefer security over other financial values.
The sole purpose of saving is to provide you with capital for the future. One of the clearest examples is pension plans. They serve so that the elderly can enjoy a salary supplement to their public pensions. Through money saved over many years, and before retirement occurs. In this unique proposal you will see more clearly the difference between what is investment and saving.
Models for savings
They are also numerous, but not as many as those intended for investment. One of the most traditional are term deposits. You get a return agreed between both parties that you will receive on a regular basis, every year or when it expires. However, and due to cheaper price of money by the monetary authorities of the European Union, its performance is minimal. In all cases, below the important barrier of 0,50%.
Another of the products that serve to promote savings are paid accounts. But they have the same problem as in the previous case. Its performance is clearly unsatisfactory to your personal interests. Moving under similar margins, or even lower still. The same can be said of bank promissory notes, another of the models for saving.
Another strategy that you will have on hand is to sign a savings plan that are marketed by most financial institutions. It is a very traditional way of making a medium-term savings bag. For with her, satisfy some of your most immediate desires. Among these, it could be buying a car or a motorcycle, taking a trip with your friends, acquiring the latest model of smartphone or another wish that you can harbor at the moment.
To end this review of the savings models offered by the markets, you cannot forget the plans that the main insurance companies have designed. They incentivize customer savings with stronger margins. In certain proposals they can rise above 3%. Aimed at attracting money from new customers through new marketing formulas. Becoming one of the most aggressive strategies currently present in the savings sector in Spain.
After analyzing the differences between saving and investing, you will be in a position to channel your relationships with the world of money much better. Knowing at all times the kind of product that you must subscribe. Proposals, in any case, you will not miss.