WHY KEEPING MONEY IN YOUR SAVINGS ACCOUNT IS THE SAFEST INVESTMENT OPTION?
The choice of people to prefer savings accounts over other investment options is also due to the fact the savings accounts are one of the most liquid investment outside of demand accounts and cash. The savings accounts not only give you an opportunity to save your money for future use but also make it very easy to access your funds while this is not the case when it comes to cashing the bonds, stocks and other investments.
These days, many people are looking for various investment options to get maximum returns on the money that they don’t intend to use in near future. Having said that, a majority of people still consider the money into their savings accounts as the safest investment option, thanks to the risk that comes with other investment options such as stocks, mutual funds etc. By and large, these people are quite satisfied with the modest interest rates of 4% to 6% offered by the PSU banks and private sector banks, respectively.
Are you looking to invest the money of your savings account?
If you are looking to invest the money of your savings accounts then you are obviously unaware of the fact that the money of your savings accounts is already an investment. Here is how: In simple terms, an investment is just putting aside a specific amount of money for future use with the hopes of getting a return on that money. Whether it is stocks or real estate, you can invest in anything that can give you a higher return on your money in future. Generally, you have to consider three important factors while making an investment.
The risk involved with a return on an investment is another key factor that influences your decision to make an investment into a particular asset. When it comes to stock market, there is a high amount of risk involved, especially for the short term investment. So, if you want to invest your money into stocks for a short time period, you are most likely to lose a major amount of money that you have invested. However, if you put that money into a savings account, you will surely get 3%-6% interest on the amount that you have maintained for a period.
The liquidity of your investment is also an important factor that you often consider while making an investment. In simple terms, liquidity refers to easy access of your funds when required. When you choose to keep your money into your savings accounts, you have the option to take out your funds whenever you need through an ATM or online funds transfer facility of NEFT & RTGS, whereas in stocks, you have to first contact a broker, who will charge commission to sell your shares. When it comes to cash deposits, you have to incur losses for cashing out early whereas in real estate, you first need to find a buyer.
If you need the invested money quickly then always choose an investment asset which is quite liquid. There is no point in investing your emergency funds into stocks, fixed deposits or real estate because these investments are especially for a long term; hence they aren’t a good option if you need the invested money quickly. If you need a certain amount at a specific time then you are highly recommended to cut down the risk factor and focus on raising contributions. For example, if you need rupees four lakhs for your marriage, a home renovation, or any else, then investing that amount into a risky investment is not a wise decision at all because that risk can rob you from your hard earned money. So keeping that amount into your savings account for a lower rate of return is a prudent choice as it comes with no risk and also gives you an opportunity to increase savings.
While the rate of return is big factor in choosing an investment asset, you should never undermine the importance of liquidity and risk involved in a particular investment. Always consider all these three rules of thumb while choosing an investment asset and go for the one which offers you best rate of return for your money with minimum risk and maximum liquidity. The savings accounts meet all parameters of a good investment. Hence they are the perfect investment choice.
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