Which Is Not a Form of Investment?
If your answer was D) Savings Accounts, you’re absolutely right! Savings accounts are an essential financial tool, offering a safe and accessible place to store your money. However, they aren't technically investments. This is because they typically offer low interest rates and are designed more for short-term savings or emergency funds than for growing wealth over time. Let’s take a closer look at the difference between savings and investments and how each can play an important role in your financial strategy.
Savings accounts are safe and stable but usually offer limited growth. They are ideal for emergency funds, short-term goals (like a vacation or holiday shopping), and are a safe place to park your money with minimal risk. While they do earn interest, the returns are usually modest. The primary benefit is peace of mind. Your money is protected (NCUA-insured) and readily accessible.
If your goal is long-term financial growth, you'll want to consider these popular types of investments for building your wealth over time:
Stocks: Owning a Piece of a Company
Potential for high returns
Riskier because values can go up and down quickly
Best for long-term investing
When you buy a stock, you are buying a small share of ownership in a company, like Apple, Nike, or your favorite coffee chain. If the company does well, the value of your stock may go up, and you could earn money either by selling your stock at a higher price or through dividends (a portion of the company’s profits shared with stockholders).
Bonds: Lending Money for a Fixed Return
Lower risk than stocks
Returns are more modest
Good for medium- to long-term goals
A bond is kind of like an IOU. They are essentially loans you give to a company, city or government, and in return, they promise to pay you back with interest after a certain period of time. Bonds don’t typically grow your money as fast as stocks, but they’re typically considered lower risk than stocks, making them a good option for conservative investors.
Mutual Funds: A Team Effort in Investing
Diversified (your money isn’t tied to just one company)
Professionally managed (great if you're not sure where to start)
May come with management fees
A mutual fund is a way to invest in lots of different things, stocks, bonds, or both at once. Mutual funds pool money from many investors to buy a diversified portfolio of stocks, bonds, or other assets. You and other investors pool your money together, and a professional fund manager picks the investments for the group. This helps spread out the risk and makes investing more accessible, especially for beginners.
Unlike savings accounts, investments are designed to increase your money over time, often for long-term goals like retirement, a child’s education, or buying a home. While they come with some level of risk, they also offer the potential for much higher returns.
No matter your experience level, the key to investing is finding the right balance between risk and reward that fits your comfort level and future goals. Many people combine savings and investments to stay financially flexible while building wealth. The right mix of savings and investments depends on your financial goals, risk tolerance, and time horizon. For example, if you are saving for retirement decades away, investing in stocks and mutual funds might be a smart strategy. If you're setting aside money for a new car in the next year, a savings account could be the better option.
Whether you're just getting started or looking to better understand your current portfolio, we are here to help. Plus, stay tuned because we will soon offer self-guided investments right in the Real One app! Real One has partnered with Eko to offer our members a seamless and intuitive digital investment experience—directly within our online banking platform. This cutting-edge, white-label solution allows you to access a range of investment options and tools, empowering you to take control of your financial future. Through personalized guidance, savings options, and access to trusted investment partners, we can help you build a strategy that fits your goals. Reach out to us today, we would love to help you make the most of your money!