Bank savings: modest interest but a safe method
Bank savings, for many people, is a safe bucket to store their cash. A customer deposits his/her savings in a bank account to receive interest depending on the maturity term. This is not only a backup plan for one’s future but also a method to keep their money “active and profitable”. Simply open a savings account and put your money in it and you will be deemed to an interest rate of 6-7% per annum on your deposit amount. For someone with low ‘risk appetite’ who is less likely to take the risk on their money, such steady profitability is acceptable. However, low risk comes along with low profit. If the annual inflation rate falls behind the bank interest rate, the value of your savings is considered to go down.
On the other hand, you may receive other benefits than interest for bank savings. You may want to use a savings book as a mortgage, for loan or to apply for a credit card or as a guarantee for a third party’s bank loan. The savings account may also be used as a proof of financial capability during application for overseas study or travel etc., for yourself or your loved ones.
Investment: high profitability - high risk
There are currently a wide range of assets to invest on, such as stock, gold, real estate etc., depending on the needs of each customer. These investments, if successful, will return you huge and attractive profit, dozens of percent or several times up.
However, not everyone is capable of successful investment. Investing requires financial knowledge, experience and long time for the equity to make profit. During volatile period of a financial, gold or real estate market, in absence of adaptability, an investor may end up losing his entire equity. In short: high risk, high return.
Obviously, it is hard to say which is better between saving or investing, as either has its own pros and cons, and it may also depend on your financial conditions as well as your risk appetite. Apart from a budget for daily necessities and emergencies, you can secure the rest for saving or investment. If you are still not sure which path to go for, the answer is both. Big and experienced investors usually opt for an optimal way to ensure capital adequacy while securing good profitability, which is to save a half and invest the rest.