The difference between saving and investing. Here's what you should know
Often people confuse saving and investing as the same thing. There is a difference.
What is the difference between saving and investing, and why is it essential to be clear about this distinction? According to Thopi Mhloli, Product Owner: Savings & Investments at Standard Bank, saving involves putting money away in a safe place with the intention of using it in the future. It is typically short-term in nature, serving as a
financial safety net for unexpected expenses or short-term goals.
On the other hand, investing entails channeling your money into various assets such as shares, funds, or properties, with the expectation that your money will grow over time. Investments are characterized by a longer time horizon and are aimed at building wealth for specific financial goals.
Listen to Thopi Mhloli, Product Owner: Savings & Investments at Standard Bank was In Conversation with John Maytham below…
You want to find that balance to the two so that your portfolio is well diversified.
Thopi Mhloli, Product Owner: Savings & Investments – Standard Bank
The key takeaway here is that your financial ambitions should drive your investment choices. Thopi emphasises the importance of balancing saving and investing to create a well-rounded portfolio. Depending on your goals, you may need to adjust your investment strategy to suit your ambition’s time horizon.
One of the more nuanced aspects of investing is understanding your risk appetite accurately. Thopi highlighted that it’s not just about what investors claim their appetite for risk is; it’s about assessing their actual capacity for risk. This
is a critical conversation to have with customers or investors.
Investments are influenced by various factors, including market fluctuations and economic conditions. It’s crucial to tailor your investment strategy based on your time frame and desired outcomes. A clear and honest conversation between financial advisors and clients helps determine the right level of risk for each individual’s unique situation.
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