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Terminology
When first entering the investment world, it seems like everyone is speaking a different language. Here is a simple guide to help you navigate the terminology and investment jargon you may encounter.
Saving vs Investing
Although they may appear to be the same and both are essential, they have 2 distinct differences.Saving is when you put money aside until you need it, while investing is putting your money into something you believe will go up in value in the future. An important distinction between the two is the time horizon; saving is for shorter term needs such as saving for a holiday or to buy something specific and investing is for medium to long term needs, such as retirement or building wealth over a long time period.
Saving generally has a fairly steady, constant uptick in value, with the increase mainly driven from contributions made by you. Often savings vehicles are lower risk, but with lower expected returns. With investing, you can expect ups and downs with the volatility of the type of assets you are invested in. And, the total sum is also driven by both investment returns and contributions. Often investing vehicles have a varying higher risk profile than savings, but with the potential of higher returns.