Saving vs. Investing
There is no specific definition of the difference, in fact we can consider the following for the purpose of explaining both for products, services and tools, and for the institutions offering them or where you can buy:
Savings .- amount of money, usually called capital saved for later use. As capital is seeking to retain hopes that the way it is stored (mattress, scope, bank, ...) has no risk.
Investment .- quantity of money rather than save it only seeks to increase it, that is worth more than the original capital. To achieve this increase the money is deposited with increased risk only when it is saved.
There is no defined boundary between "savings" and "investment" when it should take some elements to suit the particular needs of each person, among the items easier to mention are:
• Security is directly related to confidence or assurance that the investment or savings deposits will be returned. Only current operations with bonds of domestic savings being made by the National Savings Bank and Financial Services (Bansefi) have unconditional payment guarantee from the Federal Government. The national commercial banks until certain amount through the deposit insurance with the IPAB (Institute for the Protection of Bank Savings), ensure return initial deposits over their interests. In other financial institutions or instruments there will always be the possibility of not recovering the seed money saved or invested.
• Risk: is related to the occurrence of certain events that affect the ability to obtain the desired savings or investment, and sometimes lost them and / or part of our heritage, the main risks are:
• From system (systemic or systematic): Mean those events as inflation, devaluation, the economic situation, failures in consumer protection, a revolution, etc.., Among other circumstances, that is involved throughout the country and not can be eliminated regardless of the institution where they have invested in the financial system.
• From Market: It means those situations financial market (or market in which it is) that affect so widespread. For example, if the low stock market is affected the entire stock market, if the interest rate increases will affect the market for financing, the count or not with a safe deposit or payment guarantee for instruments operated, etc.. This risk is reduced through diversification of investments in different markets or types of institutions.
• From credit (default or failure): This is where the controller fails to meet its obligations, in this case the payment of interest or return on capital invested or saved in time. This risk decreases with diversified investment portfolio.
• From price / interest: It means that the price or interest may download or upload against our expectations; For example, if a loan would be a risk that the interest rate rise, while in a deposit savings at risk would be for the interest rate drop in the stock market for a holder of a role the risk is that the title acquired lower price, and so on.
• In stock / liquidity: It's when we can not change a value or financial instrument by its equivalent in money or other property. For example, there are no buyers for the titles that I have, you can not have the money to run, which is much the differential between buying and selling (spread) and so on.
• From theft: In the case of keeping savings at home, they can subtract the cash, or in case of making deposits other than the name of the institution without obtaining the receipt, the situation may arise that are not being paid to your account. It refers to an inappropriate physical handling of money.
• Certainty / Uncertainty: is the security of knowing at this stage the final value of a deposit in savings or investment. It's very common to see this term associated with the concepts of Equity and Fixed Income; here must take into account the volatility and time (deadline).
• Equities: The performance of the instrument through which savings are invested or changes over time, so it is not possible to know from the outset what the performance or how to produce exactly the deposit withdraw or terminate the investment in time established.
• Fixed Income: Although officially there is no name for this investment instruments, for instruments traditionally classified under this heading, performance is set for a specified period (deadline), so that from the outset how much one can produce savings or investment at the end of the term. Except debt instruments to fixed rate (CET, PRLVs, CED), all other performance varies over time.
• Volatility: Extent to which fluctuates or vary the price or interest of the instrument over time. It relates so closely with the risk, therefore implies the likelihood that an event happens that affects the final value of the deposit savings or investment.
• Deadline: If we increase the while maintaining a savings deposit or investment, depending on the type of instrument and its volatility, it is more difficult as they will know at the end of the period or several instalments, as the factors affecting prices and interest rates are changing. To the extent more than one term, is more likely to occur more events, favourable or unfavourable.
