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Wednesday, 8 February 2017

Investing is not Saving - Know the difference! (Part 1 of 2)

I am back to mess with your head.

There are times when I am anal when it comes to precision in our choice of words - we mean what we say; we say what we mean. (Of course it helps if we have a wider grasp of vocabulary)

However, there are times we should not let the trickery of words fool us. Nor get trapped by words by insisting to split hairs when it comes to semantics...

Today, I shall illuminate the difference between investing and saving.


When we invest, we tend to think in terms of windfall. Its the emotion of greed. We try not to admit it, but deep down we know it is.

We also know there is a possibility of loss. Like starting a business, complete loss of our capital is real! Again, conscious or unconscious, we acknowledge this fact.

The synonyms for investing are: gamble, speculate, punt, wager, bet, venture.


When we save, we are not expecting fireworks, thunder, or lighting. It like planting a acorn and hope one day it will turn into the giant oak.

We don't expect to lose our capital. Planting is not like going into the forest to hunt for game. Underneath the veneer of conservatism is the emotion of fear.

The synonyms for saving are: preserving, conserving, keeping, safeguarding, maintenance.

Various Instruments of Torture

1.  CPF

Voluntary contribution of CPF is saving. So is transferring of CPF OA to SA.

But the moment we invest our CPF funds under CPIS, its investing. Hence the majority as in 3/4 of CPF members who utilised their CPIS underperformed the low CPF hurdle of 2.5%...

2.  Bonds and Debts

Buying short term duration triple A rated bonds and holding them till maturity is saving. You won't lose the capital.

Buying Greek bonds is investing. I don't care long or short term duration!

Buying bond funds is investing. Capital loss is real. (Too complicated to explain here)

Buying unrated corporate bonds is investing. That's why they are known as junk bonds.

Lending money in peer-to-peer platforms is investing. Don't cry default when you are getting 18% yield as compensation. Or course the borrower is glad as if he would to borrow from credit card companies with no collateral down, he would be charged 25%! Make a guess where the missing 7% went?

3.  Life Insurance

Noticed I put a "Life" in front? That's precision. Insurance without the Life in front is totally another ball game altogether...

Wholelife and endowment policies are saving. You will recover the capital intact. The projected "return" is not returns as in investing returns. They are more like savings or fixed deposit interest rates.

However, there's a big "but". Wholelife you must hold till 20 years and beyond, and for endowment till maturity. Its no different from bonds or voluntary contributions to CPF. The price for capital protection is you must accept your money to be "locked-up". No free lunch!

Investment-linked policy is investing. Albeit one of the dumbest kind. You not only pay management fees to the investment portion, you also pay the sales commission so your agent can take that holiday to Europe. And you thought buying unit trusts from banks with a 5% sales charge was dumb!

Term policy? This one is unique. Its neither saving nor investing. It's like those other sort of insurance without the Life in front.

For eg, if you bought travel insurance and nothing happened during the trip, the premium you bought that travel insurance for is now money down the toilet. This is like Dirty Harry, "Do you feel lucky? Well, do you!?"

4.  Equities and Properties

Of course its investing lah!

Although some "investors" thought by calling themselves "Passive Investors" they would be accorded immunity. I not investing what? I passive! See? I'm just "saving" money every month into this ETF...

5.  Gold, Silver, and Bitcoins

Its investing.

Those who bought gold at USD $1,800 per ounce as an inflation hedge is finding out the hard way what the synonyms for investing are... Not saving right?

OK, this is just the foreplay.

Women readers would appreciate it.

Part 2 will come shortly.


  1. Hi SMol,

    My saving returns is way higher than investment returns.

    Actually most people save their way to FIre. Investment just shorten the journey

    1. Sillyinvestor,

      And that's the truth!

      Without adequate capital, how to have real money returns that matter?

      A 10 bagger on $1 of capital is still "only" $10. Not even enough to have a meal at a proper restaurant...

      5% yield on $2 million we have the option to quit our day job.

      5% yield on $200K... OK lah! That ski holiday to Switzerland is paid for!

  2. i am now more into this saying

    “It is worth remembering that winning the long-term investment game has more to do with avoidance of losses than the capturing of gains. It is a function of math.”

    No aiming of "how many baggers" for me now.

    In fact i didn't in the past or present.

    If the "baggers" happen to appear, it has been more with a little bit of luck (My fair lady's song) then skill.

    1. temperament,

      That's why those of us coming down the mountain will not invest like when we were climbing up the mountain.

      The former is capital accumulation; the latter is capital preservation.

      My part 2 may shed some light on how some got the order mixed-up...

  3. Hi SMOL,

    Hmm, let me try messing with you :)

    1) investing in my cash savings so that I can save cash for my investments, that is under which category?

    2) Investing in a relationship and saving favors for future bigger favors, is that investing or savings?

    3) When we say we're investing in our future by taking a degree, is that an investment or savings? Seems like investing, but it has the characteristics of growing a seed into a fruit tree :)

    Have fun!

    1. LP,

      I pre-empted you ;)

      My first paragraph 3rd sentence is the answer ;)

      Cannot let the cat out of the box mah! Must save the essence for part 2 :)

  4. Replies
    1. CW,

      In my definition of "invest" - which the astute reader will know its synonymous with trading - of course we "invest" in Gold and Forex.

      Invest - risk capital loss for big winnings.

      Saving - capital protection with compounded growth.

  5. in todays financial world, there is no such thing as saving, even if you put your money under your pillow!

    if you thimk you are saving by putting money in saving accounts, think again!

    1. coconut,

      Yes, banks, insurance companies, and brokers may go bankrupt. Governments may fall too.

      There is no such thing as "risk free" especially when money is not in our pocket.

      Even money under our pillow may get stolen or robbed!

      That's higher level Zen.

      I am using intermediate level Zen to first blur the lines between investing and trading to lay the grounds for my next post ;)

      That's why the majority of retail investors lose money. They thought they were saving when they were in fact investing...

    2. So B & H (and never sell), is it saving or investing?

    3. temperament,

      Buy and hold, trading, scale-in scale out, dollar cost average; average down/up; etc - they are all techniques pertaining to entries and exits.

      When it comes to saving or investing, I am focusing more on the choice of vehicles.

      For eg, one may be "saving" $500 every month into a ILP or bond ETF/fund thinking I am "saving".

      You don't expect capital loss when you put money in savings/fixed deposit/CPF right?

      But using the "wrong" vehicle, one maybe in for a rude shock!

      Just ask those savers who bought Lehman mini-bonds thinking its some kind of fancy fixed deposit account...

    4. i mean B & H and never sell - example only DBS for dividends income, is it any difference if you FD your money in DBS.

      If DBS kaput, is there a lot of difference between your operation?

      i think maybe it's better to B & H & NEVER SELL DBS if you can afford it.

    5. temperament,

      Be patient. You and coconut are both high level veterans so you see no difference. Everything is grey!

      I like to use Buddhist philosophy remember? Nothing is permanent. Even Singapore will cease to exist one day. Nations come and go.

      Hope that day is after we are both gone ;)

      Of course I agree with you.

      But to those that have not gone through what we've experienced, got to start with something they can grasp first.

      Buying DBS shares in 2008 at $20 for dividend income and then see it plunge to below $10 - now that's investing!

      The same amount of money if you put in DBS fixed deposit you'll not suffer this emotional swing. Capital is not affected. Only the interest rates get lower and lower. OK, a bit pissed off maybe.

      That's the difference between saving and investing.

      If one buys DBS share for dividend income and expect no risk of capital loss, well, where got you want cheap, you want fresh, you want big big ding-a-ling-ding-ding!?

  6. Hi Jared,

    Great you did a post on this. The problem is confusing the two concepts, thinking you are saving but actually you are investing.
    Anyway, men also like foreplay what :D

    1. Jes,

      The lady asks, the lady gets ;)

      That's why I wouldn't throw out wholelife and endowment policies if we use then as saving vehicles.

      They are alternatives for those who don't trust big daddy's penchant for moving the goal posts ;)

      Yes, older men like foreplay too. Its to compensate for lack of vigour... LOL!

      I'm the man with the slow hands (and the gentle touch).

  7. SMOL,

    As long as it is money that I can use to take care of my daily necessity does it matter if it is from saving or investment?

    Looking forward to part 2!

    1. Blursotong,

      All of sudden I am reminded of the scene in Kingdom of Heaven where Saladin was asked how much Jerusalem was worth to him.




      I shall "steal with pride" and answer you:



  8. Hi Smol

    ILPs already says it's "investment" in the first word, there are still people out there taking it as it's form of savings Perhaps endowment products might be better.

    Waiting for your part 2.

    1. Small Time Investor,

      Never underestimated the power of us Jedi snake-oils to spin black is white and white is black!

      Our Jedi mind trick will not work on those who can think for themselves :(

      I'm not sure whether its a curse or blessing. I like to argue with the STOP sign ;)


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