Saving is setting aside money you don’t spend now for emergencies or for a future purchase. Investing is buying assets such as stocks, bonds, mutual funds or real estate with the expectation that your investment will make money for you. Investments usually are selected to achieve long-term goals.

In many smaller low-income countries, high levels of extreme poverty make it difficult to generate sufficient savings to provide the funds needed to fund investment projects. This increases reliance on aid or borrowing from overseas. This problem is known as the savings gap.

Australia’s national investment and saving gap has been on average about 4 per cent of GDP over the last few decades. Total investment is funded by domestic savings and foreign investment makes up the difference.

When in a year planned investment is larger than planned saving, the level of income rises. At a higher level of income, more is saved and therefore intended saving becomes equal to intended investment. On the other hand, when planned saving is greater than planned investment in a period, the level of income will fall.

Investments have a potential for a higher return than a savings account. They offer an interest rate of around 6.25% —far higher than the ceiling rate of a savings account. Interest rates go even higher when you invest in stocks, mutual funds, and real estate.

Saving vs. investing explained

10 Important Benefits of Saving Money

• Helps in emergencies: Emergencies are always unexpected.
• Cushions against sudden job loss:
• Helps to finance vacations:
• Limits debt:
• Gives financial freedom:
• Helps prepare for retirement:
• Helps finance further education:
• Helps to finance the down payment for a mortgage:

So there you have the basic principles of successful investing. Diversification, cost control and simplicity. Focus on those three things and you can’t go too far wrong.

10 Principles of Value Investing

• Principle 1: Low Price to Earnings.
• Principle 2: Low Price to Cash Flow.
• Principle 3: Low Price to Book Value.
• Principle 4: Value of the Company.
• Principle 5: Financial Soundness.
• Principle 6: Catalyst for Recognition.

7 Investing Principles

• Establish a financial plan.
• Start saving and investing today.
• Build a diversified portfolio.
• Minimize fees and taxes.
• Protect against significant losses.
• Rebalance your portfolio regularly.
• Ignore the noise.

Investors purchase assets such as mutual funds, stocks, bonds, real estate and commodities with the expectation that the value of these assets will increase and that their financial goals will be realized.

Achieving your investment goals Following the four simple principles – goals, balance, cost and discipline – and focusing on the things you can control will help you become a better investor and ultimately deliver you the best chance for investment success.

The Sources of Investment Funds

• Personal Investment. Investment of personal resources is the most common source of funding for startups.
• Friends and Family. Friends and relatives are another common source of funding for small companies.
• Angels.
• Venture Capital.
• The Public.

Investment Process

• Step 1- Understanding the client.
• Step 2- Asset allocation decision.
• Step 3- Portfolio strategy selection.
• Step 4- Asset selection decision.
• Step 5- Evaluating portfolio performance.

Here’s an overview of seven typical sources of financing for start-ups:

• Personal investment. When starting a business, your first investor should be yourself—either with your own cash or with collateral on your assets.
• Love money.
• Venture capital.
• Angels.
• Business incubators.
• Government grants and subsidies.
• Bank loans.

Sources of finance for business are equity, debt, debentures, retained earnings, term loans, working capital loans, letter of credit, euro issue, venture funding etc. These sources of funds are used in different situations.