Which One are You: an Investor or a Saver?

Are you an Investor or Saver?

If you can answer this question, then you may know more about investing and saving than most people outside the finance and investment industry. The fact that you cannot answer this question definitively doesn’t mean that you are not already capitalizing on what the investment world has to offer. The difference between a majority of those who can answer this  question and those who are not so sure what the answer is, is how far they believe finance and investment principles and terms are beyond their ability to comprehend and put into practice.

In reality, most of us, especially the working age group, have dabbled or are dabbling in one venture or another that qualifies as an investment of their resources, such as the shop you own, or the taxi business you started with your friend, etc. But we do not usually see these as investments in the formal way that the term connotes in our minds, because they may not formally be listed on a recognized stock exchange or were not recommended by your investment adviser or broker or other finance professional.

But these all qualify as investments, regardless of their lack of lofty descriptive financial terms. The value that the investment industry principles, institutions and professionals add to this process is the structured methodologies and principles that shape your approach, helps safeguard your investments and tailors your investment basket to fulfill your goals for investing in the first place. Not all investment opportunities may be good, appropriate for you and it is by understanding yourself and the opportunity that you know what to do. These are what finance and investment professionals and the profession help you to do.

So, how do we know whether we are investors or savers or none of these and why must we be either or both? We first need to know what these mean in our everyday life.

Saving: What is it?

Let’s assume you purchased a white blouse or shirt that is in vogue and you decided you do not need it now because you have enough to wear and decide to put it aside to use in the future. Some months or years down the line, you are invited to an important function that you feel deserves the outdooring of this shirt. You pull it out of your drawer and its packaging to check it out. A number of things happen with time to both you and the shirt that can affect your ability to effectively use this shirt that you saved for just such an occasion:

#1. The shirt may be exactly as you left it, but the style may no longer be in vogue

#2. The shirt may have lost its lustre, yellowed or be moth eaten and no longer wearable

#3. The shirt may be exactly as you left it, but you may have grown lean or too fat, and now wouldn’t fit as well as it did

To save something, is to store or put aside something you own that you have no use of now, in anticipation that in the future when you need it, it will be available for you to use, exactly as you left it. So to be a saver, you must meet these criteria:

  1. Have an excess or not need something that you own now which is an asset to you
  2. Set that asset aside in anticipation of future use
  3. Expect that when you need it in the future, it will be exactly as you left it

But the key lesson that we get from above is that, ‘time happens’ to everything that we own and we must not merely save our assets or things that are of value to us but we must take additional steps to safeguard their value so they will at a minimum, be at least as valuable in the future as they are now and at best, more valuable with time. That is where investment comes in.

Investing: What is It?

Grow you savings through investment

When you invest, you take something that you own that you do not need now and put it to use in anticipation that whatever you have employed it in, will give you some reward in the future that will add more to it or make it grow to be more than it is worth now.

By investing, you put your money to work for you as you work to make more money, You create more wealth and you grow that which you have saved, so its value may at worst stay the same or at best be worth more in the future through the reward or return that you get on your investment. The expected reward or return depends on the nature of what we invest in and this reward may be exactly as we anticipated, be less than or more than anticipated.

This uncertainty surrounding how different the reward that we actually receive is from what we thought we were going to receive is what is termed ‘Risk’ in investment and it depends on the type of investment. But the rule of thumb is that, the more ‘Risky’ the opportunity, the more likely that the reward will be far different from what you thought in the beginning, either better or worse. And the riskier the opportunity, the more reward you should ask for or expect before you jump in. We will talk more about risk in subsequent posts.

So how are saving and investing linked?


All resources that we put to work through the investment process must have first been accumulated through saving. In the finance and investment world, the resource that we put aside or save in order to invest is our excess money.  Saving allows you to accumulate something valuable that you can now employ to generate more for you through the process of investing:

  1. To be an investor, you must first be a saver
  2. To be a saver, you must have money that you do not need now and set it aside
  3. To be able to set money aside now, you must you must consciously set aside part of what you earn that will not be spent, no matter how small

Start your investment journey now from the bottom up, set something aside from what you earn. This is not dependent on how much you earn or how little you can save, just make a conscious effort to save something.

In our next post, we will look at how to begin saving and when to start investing.

But I would love to read your comments. What steps are you taking to start spending less and saving? What stage are you in the saving-investment spectrum? What are your challenges?

About the Author:

I am the Founder of Synercate Advisory Ltd, an Investment Performance Consulting and GIPS® Verification firm in Ghana. I am an experienced finance and investment professional and a passionate advocate for improving the investment industry across Africa. I worked with leading financial services firms such as the Databank Group and SEM International Associates before establishing my firm and I have been at the forefront of championing the formal adoption of the GIPS® Standards in Ghana over the past three years. I also serve as an Independent Pension Trustee on five pension trust boards in Ghana.


  1. Emmanuel May 30, 2017 at 10:17 am - Reply

    Nice piece Ivy. Thanks!

    • Ivy Hesse, CFA, CIPM June 15, 2017 at 12:46 pm - Reply

      Thanks Emmanuel

  2. Richard January 4, 2017 at 11:54 am - Reply

    Thanks for the wonderful insights. The problem with most is that we dont really set our priorities right. Investing is not an option we consider at all. This article is definitely an eye opener. God bless you.

    • Ivy Hesse, CFA, CIPM January 4, 2017 at 6:43 pm - Reply

      Thanks. Glad you found it useful Richard.

  3. Lawrence GB November 11, 2016 at 3:18 pm - Reply

    Ivy good start I believe this will go long way to sensitize our growing youth to start investing no matter how small they earn. Thumbs up.

    • Ivy Hesse, CFA, CIPM November 11, 2016 at 3:32 pm - Reply

      Thanks Lawrence.

  4. Ludwig Jnr October 13, 2016 at 8:52 am - Reply

    How much do I need to start investing?
    I am always under the impression that the money I have at hand is too little and will not generate any substantial interest.
    Help me out

    • Ivy Hesse, CFA, CIPM October 13, 2016 at 12:37 pm - Reply

      Hi Ludwig. Interesting. This is the reason why you must start building up your wealth by saving, no matter how small you can start with now. The investment principle of compounding applies to all amounts, no matter how small. The earlier you start the earlier you can see your wealth grow. And also remember that a return rate of, for instance, 20% that you get on GHC100 in treasury bills, will be the same that you will get on the GHC1,000. Proportionately the same, the return on the GHC1,000 seems more significant but is still 20%, he/she gets more in terms of return amount because he/she put in more and that wealth was built up by him/her consistently over time.
      Start now and be consistent, time happens to all, that is the best advice.

  5. Esther October 9, 2016 at 12:35 am - Reply

    Investment 101, we’ll said Ivy.

    • Ivy Hesse, CFA, CIPM October 9, 2016 at 11:54 am - Reply

      Thank you Esther. Which one are you? An Investor or a saver?

  6. Sophia OA October 6, 2016 at 8:08 am - Reply

    Ivy I agree with you diversification is the key. Invest in treasury bills, invest in fixed deposits with secured financial institutions, invest in good shares, invest in mutual funds, invest in land or real estates, invest in gold and invest in hard currency.

    • Ivy Hesse, CFA, CIPM October 6, 2016 at 9:07 am - Reply

      Totally agree. That is the bedrock principle underlying investing. Do not put all your eggs in one basket. Thanks Sophia.

  7. kelvin October 5, 2016 at 10:16 pm - Reply

    Nice illustration
    Should there be a budget as to how much you want to save a month or a week?
    What kind of investment will you recommend for a student?

    • Ivy Hesse, CFA, CIPM October 6, 2016 at 9:23 am - Reply

      Thanks Kelvin. This is a great question. Setting aside a fixed amount that you save over any period that you determine, is a really great start to building and maintaining consistency in a habit of saving and investment. The amount that you decide to set aside should be based on your unique circumstances and You should start from a level that you can easily maintain and then you build up gradually as your financial circumstances improve. The kind of investment that may be right for you depends on a lot of factors unique to you and the purpose for which you are investing. For a start, you need to decide why you are investing that money, how long you are investing it for, what degree of losses you can easily stomach (your risk appetite) and how much you have to invest, among others. A great place to start if you do not have a lot of money to have your own personalized investment account, is to look at mutual funds. They come in all shapes and sizes once you have been able to answer these key questions. I will be happy to put you in touch with a few mutual fund managers that can guide you to do that. Also watch out for subsequent posts on setting up your investment policy statement, choosing a mutual fund and manager soon.

  8. Philip October 5, 2016 at 10:05 pm - Reply

    I opened a savings account with GT bank. They do not deduct any money from my account as charges but on a monthly basis i am credited with a little interest. Although it is quite low in return i would want to find out if that is a kind of investment or not. Im not really sure of myself because i do want to invest but it seems to me that i am just saving. Thank you.

    • Ivy Hesse, CFA, CIPM October 6, 2016 at 6:12 pm - Reply

      Hi Philip, this is a really great question. Interest is classified as a return on investment instruments that are called ‘fixed income’ products. To an extent that qualifies as return on an investment, but in the investment products spectrum that savings account will be at the lowest point of the returns and risk ladder. Because your money has to be available-on-demand to you in your savings account anytime you go to the bank or ATM to withdraw it, banks are required to tuck away a portion of that money in the safest investments, usually ‘risk free’ government treasury securities. In truth, it is unlikely that you will earn anything even close to the government treasury bill rate over the time the money is in the account (which is ideally the lowest return you should ask for, as it comparatively carries the lowest risk of loss or is classified as risk free) . So when you start your investment journey, the savings account should primarily be for accumulating enough funds, once you have enough to meet your day-to-day needs for a reasonable period of time, you then begin investing those excess funds beyond your expense cover.

  9. Frank Odoom October 4, 2016 at 2:19 pm - Reply

    I am very interested in investing especially in risk free instruments but the other forms of investments not “stocks” but like some quick money turn around for example short pre-financing of SMB contracts for some interest is always tempting even though the risks are high. I realize that as much as i like risk free instruments, i also love the short term investment returns when no risk is realized because it gives you the actual feel that your money is working for you.

    • Ivy Hesse, CFA, CIPM October 4, 2016 at 5:58 pm - Reply

      Thanks Frank. Well, there is nothing like a completely risk free instrument. Developments such as the Greek crises have eroded the confidence in the classic assumption that government instruments are completely risk free and that, sometimes, the risk attached to the instruments of some corporate institutions, especially some well established multinationals, can be lower than that of some governments, especially those in developing countries. When it comes to risk, the best option is that, you put in as much as you don’t mind losing in inverse proportion to the anticipated risk.

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Which One are You: an Investor or a Saver?

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