Question

Discuss the difference between saving and investing. Give three different options to invest. Explain the difference between investing in stocks, bonds, mutual funds, IRAs, and 401 Ks. How do you plan to invest for your retirement? When should you start planning for retirement?

Answer 1

DIFFERENCE BETWEEN SAVING AND INVESTMENT ARE :

saving means of putting money aside. mainly in the bank account which helps you in the emergency. whereas investment men to using your money with the main aim of growing that money.

example of saving is saving account in the bank and the example of investment is the purchase of shares, property or the mutual fund.

investment is done to have a return which may further help in capital formation but saving is done for the purpose to use that money in the case of an emergency.

the risk in investment is very high and on the other hand, the risk in saving is low.

different options to invest the money are that the person may purchase the shares of any company and sell the shares when the price of the shares increases. another option is to invest in mutual funds which provide interest on your money. The next option to invest the money is buying property or gold or any jewelry.

difference between investing in stock, bonds, mutual fund, IRAs and 401ks are :

stock means when the company needs to raise its capital then they issue the shares by the name of the company on which the purchaser of the shares may receive the dividend on that. in stock, there is no guarantee for the profit and have higher chances of risk.

bonds are the loan provided to the company on which the individual receives the interest over their bond money. the risk in a bond is also high as sometimes the investor doesn't recover their money back.

mutual funds are also the investment in the share, stocks and bond nut the manager of the mutual fund investment company manages the firm and you receive the interest over the investment.

401ks is an investment account for the future of the employee in which the company provides them the opportunity to save and invest their own money which is deductible from their investment.

IRAs stands for individual retirement accounts. it is similar to 401ks but it allows the holder to invest their money in whichever asset.

I will prefer 401ks most because I believe that there are fewer risks associated with 401ks. the best age to plan for retirement is till the age when getting your first payback as money always helps in an emergency.

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