Always confused between savings and mutual funds ? Thinkin in which to invest ?
i m jotting down few points of differences between the two , which may help you out in opting for either of the one .
Risk
Savings accounts insured institutions face no risk of loss up to the current FDIC account limits. Mutual funds are subject to substantial risk of loss correlated with the performance of the securities they own.
Benefits
Savings accounts pay a relatively low interest rate which, according to the Motley Fool, rarely keeps pace with inflation. The rate of return (or loss) on a mutual fund correlates to the performance of the portfolio of securities it owns, many of which have outpaced the rate of inflation over long periods of time.
Liquidity Considerations
Savings accounts can be accessed at any time and are highly liquid. Mutual funds entail fluctuating values, exposing holders to loss should they need to withdraw funds during an investment market down period.
Expenses
Savings accounts generally do not entail any ancillary fees. Mutual funds charge various fees in the form of sales loads, account fees, redemption fees, purchase fees and exchange fees. The internal expenses of running the fund, including the costs of trading securities, is also deducted from the shareholders’ equity.