What is the difference between Saving and Investing?

Mrs_pbradley936

What is the difference between Saving and Investing?

I have not really given it much thought but always supposed that investing was long term saving - while saving was short term with goal in mind i.e. holiday, Christmas etc. Can someone enlighten me?

This cropped up on another thread and I thought more people would comment if the title reflected the topic.

ReportInvestor

That's basically wrong. [Saving= short term. Investing = long term.]

Saving is not putting your original capital at risk while getting interest on it from banks & building societies.

You put your original capital at risk if you invest in gilts, corporate bonds, PIBs, commercial property, residential property, shares (including OEICs, unit trusts & investment trusts).

But by not putting your capital at risk [in cash], you still expose it to the risk of inflation.

Investing in equities (shares, and OEICs, unit trusts, investments trusts that also invest in shares) is assuming that the world capitalist economy is going to grow, so that company profits grow, and so that dividends (the income from shares) also grows. If this happens at or above expected trends, then share prices (your capital) will also continue to grow.

Investing in PIBS, corporate bonds and gilts is a way of guaranteeing income even if interest rates fall. If interest rates fall you are also likely to make capital gains on these investments. If interest rates rise I will let you finish the sentence.....

cheerfulcat

Hugely simplified," saving " is putting off spending [passive]. " Investing " is attempting to increase capital [active].

steady__eddie

I don't wish to "corrupt" this thread but I was amused by a thread over on the money bag which basically asked the same question. http://www.themoneybag.com/vb/showthread.php?t=37792

richgirl

Savings tend to be secure where you don't risk the capital.

Investing tends to carry a risk to the capital for higher return.

Milarky

Another distinction I would make is between 'investors' and 'savers'. I consider an investor to already have the money (irrespective of where they 'vest' it) whereas a 'saver' will be someone putting aside money from income to create capital. Thus 'lump sum' and 'regular' applies equally to saving and investing but I tend to regard money put regularly towards (say) a pension (investment backed product) as basically 'saving' - since that is a 'savings' activity

Midas

Well that's clear then.