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Investment and saving decisions - Essay Example

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Summary
It expounds on what investment entails defining it both economically and financially. It also focuses on discussing what saving is and what saving decision entails. In general, the paper seeks to unravel the myth of…
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Investment and saving decisions

Download file to see previous pages... Investment definition from a financial point of view stipulates that it is any monetary asset purchased hoping that the asset shall yield returns with profit in the future. There is a hope of selling the asset in an appreciated price or higher price than it was purchased (Park 56).
Good examples of investment in the economic view are building of a factory that will be used to produce goods and or going to college or university. In a financial point of view investment comes in the sense of bond purchases, stocks and real estate property (Hayes and Garvin 71). Investment is always confused with speculation, but the two words have clear cut differences. Investment is usually done with the aim of again or the aim of wealth creation. Speculation is often a flat transaction. Wealth does not form any part of the transaction. Even so, speculators are known to make informed decisions about their actions. The above factor denies speculation the privilege of being termed as traditional investing (Hayes and Garvin 71-72).
Saving may bear different meaning to different people and at different forums. Some people believe that saving is putting money in the bank. There are those that believe that saving is buying stocks and bonds or contributing to a pension scheme. In the economic point of view, saving means a system of less consumption of recourses with an aim of future consumption. Therefore, saving is deferring consumption with an aim of storing and saving the deferred consumption for a future use (Hayes and Garvin 76-79).
Saving and investment are vital for the growth and development of a person’s financial stability. The two words are often confused to mean the same thing. Even so, the two words are related in a way or may make complete sense if they are used together (Hayes and Abernathy 66-67). A person may decide to save through investment. For instance, ...Download file to see next pagesRead More
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