Savings Vs Investments
We all are aware of savings accounts and we have also heard of Investments terminology. Recently we found that most of us get confused about the difference between savings and investment. We will talk on both of these to understand some of the basic difference between the two.
Savings is more like your “Emergency cash Reserves” which you can readily dip into in case of any personal emergencies. These are instruments which are liquid and easy to en-cash.
Examples include your bank-accounts, fixed-deposit and recurring-deposit or even the liquid cash at hands.
These are typically money that is kept aside (invested) which you are least interested in for a specific period (or) the money which will be used only after when you have exhausted your “savings” fund.
Your Real-estate is an investment which grows exponentially over the years but you cannot count your real-estate asset for a financial emergency. Because these cannot be liquidated in few days (few weeks, months in some cases – depends on where the property is located)
If you want to invest then the first step is to “Save” – Prepare a plan for Emergency Fund and religiously pump in money to the fund. This could be 3-4 months of your monthly salary.
So when you have your emergency fund its time to invest. Explore other avenues like SIP, Mutual Funds, Real-estate or gold. Having an emergency fund gives you a cushion to fall-back in case of any unfortunate situations and at the same time it helps us to continue the investments which we have planned earlier. You can also think on other aspect of insurance.
As such the best way to create a secure portfolio is to have 30% amount in your savings 40% as investment, 20% of share in LIC and health and other tax saving scheme and 10% of your money on high risk high return investments.