Difference Between Investment vs Savings

Both Investment vs Savings are popular choices in the market; let us discuss some of the major differences between them:

The basis of Comparison	Investment	Savings
Meaning	Primary objective of investment is Asset appreciation over a longer time frame to meet certain long-term objectives like owning a property, education etc.	Savings are related to coping up with unwanted financial needs, near-term expenditures like holidays, gifts, expensive items for personal needs etc
Tax Concessions	Investments in certain Government Bonds are exempted from tax, whereas long-term investments in shares were earlier exempted from tax but it has been placed under 10% tax under ‘Capital Gains’ in the recent past.	There is no question of taxing idle cash savings as it has already been taxed from the income from the person. On the other hand, when savings are made within banks, the interest amount is taxed when it crosses a certain amount.
Inflation and rate of return	Investment has the ability to combat the inflation rate. Instruments like Bonds, debentures can only give a marginally higher return than inflation. On the other hand, Equity centric funds has delivered an exponential return in a longer time frame beating inflation and generating healthy returns to the asset invested.	Savings could not beat inflation; the nominal value of the money remains the same whereas the value of money in real terms tends to decrease over a period of time as the purchasing power tends to decrease over years.
Possibility of a negative returns	There is a possibility of a negative return on Investment when instruments like Stocks and shares are allocated in a higher amount because of the market volatility.	Savings in the form of cash cannot result in erosion of the nominal value of the funds. However, the real value tends to decrease as the purchasing power of the same amount of funds will result in lower commodities comparing to its earlier period
Instruments	Investment has several instruments like bonds, debentures, stocks, land and property, mutual funds etc.	Saving is done on a cash basis by the individual or deposited in the banks.

Conclusion

Investment vs savings both are generated from the Income of an Individual. Savings in the form of Cash that lies with the banks or with the individual and does not have the capacity to generate higher returns. Investment has always proved to give returns (moderate to higher depending on the type of instrument allocated) over time and it can combat inflation. Savings does not have the risk of capital depreciation like Investment (specifically stocks). I hope now you must have got a fairer idea of both Investment vs savings.

Important links –

Idobro Impact Solutions has partnered with Tata Capital to make Financial Literacy accessible for all. For more information on the initiative and to get a deeper knowledge on financial terminology, visit: www.dhangyan.com

Difference Between Investment vs Savings

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