Which Of The Following Statements About Investing Is True?

Which of the following statements about investing is true?

Have you been hopping all around the internet, hoping that your question will finally be answered? Well, in that case, you are here at the right place.

We did the hopping job for you, and here I have the answer that you have so desperately been long around.

?Which of the following statements about investing is true?

a) On average, putting money in a savings account earns a higher return than investing money in the stock market.

b) Investing is riskier than putting money in savings accounts.

c) Investing is best for short-term financial goals.

d) Investing is a guaranteed way to make money.?

The correct answer here is option (b)- investing is riskier than putting money in a savings account.

However, getting just the answer may not just be enough. There is always an explanation as to why it is the correct option.

We got you covered there too!

Keep reading through the article to get detailed explanations behind the correct answer and more information about investments and savings and how they can be helpful in your money-making tactics.

Investing Is Riskier Than Putting Money In Savings Accounts

Multiple factors drive this statement. However true it may be, you cannot really judge its accountability without having clear background knowledge of its driving factors.

So, without further delay, let us now decide which is better- investing or saving?

Key Points To Remember

• What is it that you actually need; when you need it; and how much can you actually afford to be able to contribute all factors while deciding if you want to save or invest?

• Generally, you might choose to invest the money for long-term financial goals, like retirement, as it gives you a long time frame to recover from the fluctuations of the stock market.

• If your financial goals are short-term, maybe five years or less, then it is always smarter to put your money in a high-yielding savings account.

Why Does Money In Savings Accounts Earn More Interest Than Money Invested In The Stock Market?   

To be very honest, there is nothing riskier than the stock market. While it is a good source to earn money to earn money, the stock market is extremely volatile. This means there is no guarantee that the money you put in the stock market will always fetch you a good rate of return.

There have been instances where people have gone through severe losses, and companies were on the verge of going bankrupt due to the ups and downs of the stock market. Stock market, in general, is an option that aims to bring in long term profit. You cannot expect your money to grow within a week. It may so happen that your money is facing severe loss in comparison to what you may get in a savings account.

Savings accounts are not affected by the volatility of the market. Therefore, the money does not go through any fluctuations. Rather, the money keeps growing due to the power of compounding interest.

Why Is Investing Not Best For Short-Term Goals?   

It is no news that investing is not the best option when it comes to short term goals. Due to the volatility of the market, the rates of return keep fluctuating. Therefore, there is a high chance that your money may face loss immediately after you invest it.

However, that does not mean that your money would go to waste by investing it in the stock market. That is not the case. Stock market investments are the best when they are done for the long term. This way, your money will grow for the long term regardless of the fluctuations of the market. This is why we prefer saving over investing when it comes to long term profit. While savings have certain downsides as well, they are quite manageable in comparison to investing.

Why Is Investing Not A Guaranteed Way To Make Money?  

Investing can never guarantee that you will be able to earn money. As I have mentioned earlier, there is extreme volatility in the market. You would literally have no idea what would happen to your money once you put it in there. It may come out as five times the amount that you invested, or it may make you go completely bankrupt. There is no guarantee behind it. In comparison to investing, saving is a much safer option. Savings accounts are not volatile. Therefore, there is no chance for your money to go down the slide once you put it in a savings account.

Why Would Individuals Usually Go For Saving Over Investing?

?Generally, companies or individuals make investments to obtain benefits in a longer-term, these monetary investments are made to increase profits.?

When exploring long-term investments, real estate investment is a notable option, providing the potential for both steady returns and property appreciation over time. Diversifying a portfolio with real estate assets can offer stability and the opportunity for wealth accumulation through rental income and property value appreciation.

When exploring long-term investments, real estate investment is a notable option, providing the potential for both steady returns and property appreciation over time. Diversifying a portfolio with real estate assets can offer stability and the opportunity for wealth accumulation through rental income and property value appreciation.

?The investments can generate profits, and also, can generate losses, one of the disadvantages of the investment being the uncertainty that the product or project in which you are investing has the desired results. Therefore, many people believe that one way of not putting their money at risk is to save money instead of investing it.?

Investing is indeed a risky business. The stock market goes from Bull to Bear in a flick of a moment. Hence, the stocks that may have been yielding you a generous amount of profit may be the same ones that result in you incurring severe losses. Sometimes, these losses may result in individuals or companies going bankrupt. This is a kind of risk that not a lot of people feel prepared to take. So, they just simply save their money instead of investing in the stock market.

?Through savings accounts the person only deposits the money, these funds will be at your disposal whenever you want, also, this money will generate interest according to the amount saved.? 

Prioritizing Is Always Prior 

Prioritizing your goals always comes first. Before you make a decision if you want to save or invest, it is very important to ask yourself a handful of questions-

• What do I need?
• When do I need it?
• How much can I contribute to it?

These questions help you figure out where your priorities lie.

For instance, if you are saving for an occasion where you are looking for short-term profits, savings is what you need.

However, if you are looking for long-term profits, like retirement, investment is a far wiser decision.

Therefore, comparing investing with saving does not really make any sense. The benefits of each of them solely depend on the priority goals of individuals.

How To Decide Between Short-Term Goals And Long-Term Goals?

This is an easy equation.

Long-term money goals like retirement are better for investment because the money that you invest has a broader time frame to go through the stock market fluctuations and accordingly recover from it.

But, in the case of short-term goals, for instance, traveling or wedding plans, savings is the best option as it generates short-term yields, which also has lesser risks of any downturn.

However, this is completely based on your personal risk tolerance and, obviously, your financial health.

Pros And Cons Saving And Investing

Let us now have a fair comparison between saving and investing.

Pros 

• Investing provides you with a longer time frame which grants compound interest and grows your money.

• Saving money is considered liquid. This means you get easy access to the money whenever you need it without facing any penalties.

• Savings are not subject to the volatile nature of the stock market.

Cons

• Stock markets are inherently involved with risks; therefore, investments might decline.

• You may have to face penalties if you try to withdraw the funds too soon.

• In the case of saving, you might lose the market gains and a potentially noteworthy amount of compound interest.

Frequently Asked Questions!! (FAQs)

Wrapping Up

By now, I have pretty much answered your question, ?Which of the following statements about investing is true??

At the same time, I am hoping that you have gotten a clear picture between investing and sayings.

While savings are beneficial for short-term profits and do not involve any risks, investments, on the other hand, are more concerned with long-term profits and involve major risks due to market fluctuations.

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