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100 FAQ's on Basic Finance

Module Units

How is investment different from Savings?


Investment means allocating income with the expectation of some future benefit or profit. When an asset or an item is acquired with the purpose of letting it grow so that you can earn profit out of it, it is an investment. 


Generally, investments are made in two things in mind:


a. Capital appreciation
b. Income generating plans 


So, when you purchase stocks, mutual funds, real estate, fixed deposits, etc. you are putting your money to work for you as these instruments will either appreciate in future or will keep on giving regular returns till the time you are holding them.


So, how is savings different from an investment?

  • Savings are made for short-term goals, whereas investments are for achieving long-term goals. 
  • Savings funds are easily accessible like we can withdraw from our savings bank account anytime we want. But, invested funds are difficult to access, such as corporate bonds, which have a fixed maturity before that, we cannot make a withdrawal. 
  • Savings have lower risk & lower profit potential like our savings account, fixed deposits, etc. On the other hand, investments have higher risk & higher profit potential like investing in stocks, mutual funds, etc. 

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