Difference between investing & saving
Savings Account
Return on Investments
5%
Savings required
₹NaN/month
Retirement Plan
Return on Investments
9%
Savings required
₹NaN/month
Securities
Return on Investments
12%
Savings required
₹NaN/month
Saving, but only in savings bank account
If you are getting started even with your savings bank account, if you follow savings-only path, assuming 5% ROI, the monthly savings required to reach the target amount will be ₹NaN.
Investing through Retirement Plans
If you instead switch to retirement plans, i.e. start contributing to these options regularly, assuming 9% ROI, the monthly savings required to reach the target amount will be ₹NaN.
Investing in securities
Instead of relying only on bank’s savings account or retirement plans, if you start investing it, and aim for 12% ROI, the monthly savings required to reach the target amount would have gone down to ₹NaN.
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The Importance of Investing
While saving is essential for short-term financial goals and emergencies, investing offers several advantages over saving alone when it comes to preparing for retirement:-
Potential for Higher Returns: Investing in assets such as stocks, bonds, and mutual funds typically offers the potential for higher returns compared to traditional savings accounts or fixed deposit (FDs). Over the long term, investment returns have historically outpaced inflation, helping your retirement savings to grow faster.
Beating Inflation: Investing allows your money to grow at a rate that outpaces inflation, preserving your purchasing power over time. In contrast, savings accounts may offer minimal interest rates that fail to keep up with inflation, causing the real value of your savings to erode over time.
Harnessing the Power of Compounding: Investing early allows you to benefit from the power of compounding, where your investment earnings generate additional returns. Over time, compounding can significantly boost the growth of your retirement savings, especially when reinvested dividends and capital gains are allowed to accumulate.
Diversification and Risk Management: Investing enables you to diversify your portfolio across various asset classNamees, industries, and geographic regions, reducing the overall risk of your investments. Diversification helps mitigate the impact of market volatility and specific asset downturns, enhancing the stability of your retirement savings.
Tax Advantages: Certain retirement accounts and investment options offer tax benefits that can help your investments grow more efficiently. Contributions to these options may be tax-deductible or grow tax-deferred, allowing your investments to compound without immediate tax consequences.
Long-Term Goals: Investing is well-suited for achieving long-term financial goals like retirement, as it aligns with the extended time horizon and provides the opportunity for wealth accumulation over decades.
While investing involves inherent risks, such as market volatility and potential loss of principal, these risks can be managed through prudent investment strategies, diversification, and a long-term perspective. By combining saving with investing, you can build a robust retirement portfolio that balances growth potential with risk management, ultimately increasing the likelihood of achieving your retirement goals.
Potential for Higher Returns: Investing in assets such as stocks, bonds, and mutual funds typically offers the potential for higher returns compared to traditional savings accounts or fixed deposit (FDs). Over the long term, investment returns have historically outpaced inflation, helping your retirement savings to grow faster.
Beating Inflation: Investing allows your money to grow at a rate that outpaces inflation, preserving your purchasing power over time. In contrast, savings accounts may offer minimal interest rates that fail to keep up with inflation, causing the real value of your savings to erode over time.
Harnessing the Power of Compounding: Investing early allows you to benefit from the power of compounding, where your investment earnings generate additional returns. Over time, compounding can significantly boost the growth of your retirement savings, especially when reinvested dividends and capital gains are allowed to accumulate.
Diversification and Risk Management: Investing enables you to diversify your portfolio across various asset classNamees, industries, and geographic regions, reducing the overall risk of your investments. Diversification helps mitigate the impact of market volatility and specific asset downturns, enhancing the stability of your retirement savings.
Tax Advantages: Certain retirement accounts and investment options offer tax benefits that can help your investments grow more efficiently. Contributions to these options may be tax-deductible or grow tax-deferred, allowing your investments to compound without immediate tax consequences.
Long-Term Goals: Investing is well-suited for achieving long-term financial goals like retirement, as it aligns with the extended time horizon and provides the opportunity for wealth accumulation over decades.
While investing involves inherent risks, such as market volatility and potential loss of principal, these risks can be managed through prudent investment strategies, diversification, and a long-term perspective. By combining saving with investing, you can build a robust retirement portfolio that balances growth potential with risk management, ultimately increasing the likelihood of achieving your retirement goals.
Retirement Goal Report
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