In this video, I discuss the differences between Investing and Saving. It’s important to understand the differences in order to make the right financial investment decisions.
Investing is basically putting your money to work in order to generate a positive return with the expectation of generating income, profits or gains.
One can invest in many ways either directly or indirectly such as using money to start a business, buying real estate or into the stock market.
Investing is different from saving because investing means that there is some risk involved because the project could fail, you have market risk also.. so investing involves speculation. The speculation that your investment could grow but also that it could also fail.

The core principal of investing is to outpace the rate of inflation. Inflation is the gradual rise in prices and the slow decline in purchasing power of your dollars over time. The goal is to make enough off your investments to exceed the decline of the value of your money.

For example.. when you go to the grocery store and buy a loaf of bread.. you notice.. wow the price of this bread is $1.00 more than it was just a few months ago… this is inflation!
So that’s what you want to invest your money so that you can at least keep up with inflation and if you do well enough you will beat it also!

For example.. if you start with $1000.. then invest $250/m for 35 years at a 10% return.. you will have 1.1 million dollars vs if you just put it under your mattress.. you would have missed out on over 700k in interest.. you’ll just have saved 152k when you could have over a million dollars!

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DISCLAIMER: I am not a financial advisor nor a CPA. These videos are for educational and entertainment purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.

✨ ABOUT Trade Babe Official ✨
Hi! My name is Trade Babe. I am a self-taught Trader who specializes in Finance, Stocks, ETF’s and Long Term Investing.

As a retired Financial Advisor who started working in Finance at the age of 25. For the last decade and more I have learned the skills of Day Trading and Investing, I have dedicated my channel to helping people achieve Financial Literacy in order to become free and financially independent!

On this channel, I share my successes, failures, and experiences. I want people to know I have come from a humble background and with a little help from mentors and educators you also can succeed in the Stock Market.

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Investing vs Saving: Understanding the Key Differences

When it comes to managing our finances, two essential concepts we often come across are investing and saving. While both play a crucial role in securing our financial future, it is important to understand the key differences between these two approaches. By comprehending their distinctions, we can make informed decisions and choose the most appropriate strategy for our financial goals.

Saving, in its simplest form, refers to setting aside a portion of our income for future use. It entails putting money into low-risk, interest-bearing accounts such as savings accounts, certificates of deposit (CDs), or money market accounts. The primary purpose of saving is to accumulate funds over time without exposing them to significant risks. Savings are readily accessible, and withdrawals can be made at any time without incurring penalties. Most individuals save to build an emergency fund, make purchases in the near future, or plan for short-term goals.

On the other hand, investing involves deploying money into financial vehicles that have the potential to generate higher returns over the long term. Unlike saving, investing generally carries a higher level of risk and uncertainty. It requires allocating funds in assets such as stocks, bonds, real estate, or mutual funds with the aim of achieving capital appreciation or generating income through dividends or interest. Investing often involves a longer time horizon and involves tying up funds for an extended period. The key objective of investing is to outpace inflation and grow one’s wealth significantly.

There are several important distinctions between saving and investing. One significant difference lies in the potential returns they offer. While saving provides the security of principal and a guaranteed return on investment in the form of interest, the returns are relatively low, often struggling to keep pace with inflation. Investing, on the other hand, presents the potential for higher returns, but with a greater element of risk. The value of investments can fluctuate based on market conditions, and there is always the possibility of losing some or all of the invested capital.

Another key difference between the two approaches is the attitude towards risk. Savers tend to prioritize the preservation of their money’s value and prioritize safety over potential returns. Investors, on the other hand, are willing to accept more risk in pursuit of higher yields and the possibility of capital appreciation. Understanding one’s risk tolerance is crucial in determining whether to save or invest.

Furthermore, the time horizon is a critical factor in deciding between saving and investing. Saving is generally suitable for short-term goals or emergencies, as the money is easily accessible when needed. Investing is better suited for long-term financial goals, such as retirement or children’s education funds, as it allows the power of compounding to work over an extended period. The longer the investment horizon, the greater the potential for higher returns.

In conclusion, both saving and investing have their advantages and serve different purposes in our financial lives. Saving provides security and liquidity, making it suitable for short-term needs, while investing offers the potential for higher returns and wealth growth over the long term. It is important to assess one’s financial goals, risk tolerance, and time horizon to determine the most appropriate strategy. In many cases, a balanced approach that combines saving and investing can provide the best outcomes, ensuring financial stability in the present and growth for the future.

Investing versus Saving: An In-Depth Look at the Crucial Distinctions | Trade Babe Official appeared first on Inflation Protection.