What is the difference between saving, investing, trading, and speculating? Sometimes people think they are saving, when they are really investing. Or they trade when they are trying to invest. Sometimes people simply don't know the difference between investing and trading so they just end up saving. And that's a real shame.
Wealth building comes from knowing your money strategy and working it wisely. The main difference between saving, investing, trading, and speculating is the degree of risk you take with your money. But in this era of volatility and in times of inflation, sometimes the conservative position puts money at greater risk. Let's look at these choices.
Savings begin when you put aside a part of your income and spend less than you earn. The foremost goal with savings is preservation of capital. Not lossing money is more important than growing your money. Typically, savers place their money in some secure, low-risk place. If you ask yourself how to save money, these are considered low-risk options: a dependable bank, cash, physical gold, a savings bond, or a certificate of deposit.
People save because they have a use for the money in the future. They could save for education or to buy a costly item, an expansive vacation, or a house, to pay for a wedding, or even just for a rainy day. Sometimes they save in order to put aside enough money to invest. Most experts recommend having a savings of 6-8 months of your living expenses.
Advantage: Cash allows you to move quickly when needed. You can invest when the right opportunity comes along. If you have a medical emergency or lose your job, you have money to tide you over.