What is Investment?
Investment means putting some thing, often money to any things such as, shares, funds, businesses that will return some profit or interest in future. Many of us confuse investment with saving, however there is a clear difference between saving and investment.
How is Investing different from Saving?
Savings are generally funds that you set aside to meet your future needs. These could be taking your family for a small holiday or buying an electronic item. Another important feature of savings is that these can be accessed relatively quickly. The most universal way of saving is in to a bank account (‘savings’ account) where the money is available to you on demand. Savings involve limited risk of cash devaluing due to inflation.
Investments, on the other hand, is what helps you meet your longer term needs and larger financial goals. There is some level of risk attached to all types of investments and this is what determines the returns on your investments. Investment risk can cause a capital loss when an investment is realized. The higher the risk, the greater the chances of a higher return. There are various investment types along the risk-return spectrum.
In many instances the terms saving and investment are used interchangeably, which confuses this distinction. For example many deposit accounts are labeled as investment accounts by banks for marketing purposes. Whether an asset is a savings or an investment depends on where the money is invested: if it is cash then it is savings, if its value can fluctuate then it is investment.
Very interesting video that explains the concept of investing, watch and enjoy :