SAVING vs INVESTMENTS

It is important to understand the distinction between savings and investments. Savings relate to such instruments as fixed deposits and saving accounts in banks. Essentially, savings is generally adequate if the objective is to keep your money abreast with the rate of inflation. Unfortunately, it will not allow you the luxury of growing your assets above the rate of inflation.

Investments, on the other hand, will allow you to grow your wealth, sometimes way above the rate of inflation. For example, where savings will gather interest rates of around 5 - 6%, it is not uncommon to learn of rates of return of 12% or more when it comes to investments. For those who were fortunate to get into blue chip stocks when the KLCI was 260 points in 1998 and then sold their blue chip shares in 1999, their return was whopping 200% or more in 1999. However on hindsight, such windfalls cannot be planned and it is only possible when the investor has accepted the accompanying risk that comes with the investment.