In colloquial terms, investing is synonymous with “place savings”. However, what we understand by a saver does not always coincide with the conception of what an investor is. These seven differences can help us understand it.
The risk profiles
Sometimes, a saver is qualified as someone who places their savings in low-risk alternatives, while an investor is called someone who assumes greater risks in the placement of their savings. For example, a saver will contract time deposits while an investor, for his part, will invest directly in shares or will do so through other instruments such as investment funds.
Origin and application
Saving places, the focus on the origin of funds that are applied to investment, on a difference between our income and what we have consumed. For its part, the investment is fixed on the destination of money that we disburse in exchange for obtaining some good or right that can provide us with advantages over time, such as housing, financial investments, or other less common destinations, such as wine, country estates, jewelry, and precious metals, etc.
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The quantitative difference between saving and investment
A family, in a given period, can invest more or less than it has saved. The reason is in debt. For example, if we are paying a mortgage, an important part of what we do not consume will be used to pay its amortization and interest. In addition, it is also possible to invest with borrowed money, which is precisely what families do when they apply for a mortgage to buy a home.
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The relationship of saving with durable consumption
Although investment is the final destination of most of our savings, apart also ends up financing other needs, such as durable consumption. This is the case when, for example, we ask for a loan to buy a washing machine, a kitchen, a television, etc.
How to share risks and benefits
Financial intermediaries have as one of their main missions to channel savings towards investment. They receive funds from savers and generate different alternatives for their placement with different conditions for sharing risks and benefits.
The different effort of the saver and the investor
Being a saver requires making efforts to consume reasonably and enhance our ability to generate income. Being an investor requires an understanding of the complexity of the alternative we have chosen to invest in, an adequate weighting of the risks that we can assume in exchange for the remuneration that we intend to obtain and, in many cases, the ability to maintain the investment for some time without withdrawing the money.
The time profile of savings and investment
We can make decisions that help improve our savings prospects in the future, such as buying energy-efficient appliances or training to qualify for a higher salary so we can save more. However, most decisions related to saving are related to the present and our ability to properly configure the family budget. On the contrary, the key in any investment is knowing what it can offer us in the future.
