WHAT IS DIFFERENT BETWEEN INVESTMENT AND SAVINGS?

Investment is an activity that is entered into by those who have savings. Savings can be defined as the excess of Income over expenditure. But all savers need not be investors.

For example, an individual who sets aside some money is a box for a nice birthday present is a saver, but cannot be considered as an investor on the other hand, an individual who opens a savings bank account and deposits a part of the money regularly for a nice birthday presents would be called an Investor.

The motive of a savings does not distinguish a saver as an investor. However, the expectations of the saver distinguish the investor from a saver. The saver who puts aside money in a box cannot have an expectation of excess returns attached to it.

However, the saver who opens a bank deposit account expects a return from the bank and hence is differentiated as an investor. Expectation of return is hence an essential characteristic of Investment.