Which of the following statements is FALSE?

Which of the following statements is FALSE?

A. Investing is best when you’re looking to maintain thevalue of your money with a little bit of growth.

B. You earn interest in a savings account and a return byinvesting in the stock market.

C. Putting your money in a savings account is best if you’llneed to withdraw the money in the near future.

D. Investing is riskier than putting your money in a savings account.

Answer: A. Investing is best when you’re looking to maintain thevalue of your money with a little bit of growth.

This statement is false because it distorts the key role and the possibilities of investing. Savings, on the other hand, are, for the most part, expected to be held over the long term and grow very little or not at all, unlike investments.

Savings accounts, on the other hand, are safer in that they guarantee that your money will be safely tucked away and earn a little interest; however, investing in stocks, mutual funds, or properties promises better returns than a savings account per unit of investment or in the long run. For instance, the S&P 500 index containing large companies’ shares in the United States awarded average annual, pre-inflation, gains of approximately 10%. This is a far more attractive rate of return than conventional savings accounts can ever offer, and bare minimums which can barely keep up with inflation rates.

It also distorts the potential of investing, or in simple terms paints a negative picture of the reality that is in existence. Of course, investments do fluctuate in the short run and can easily lose their value but they have the potential of giving far much more than a simple preservation of value. For instance, an initial investment of $10 000 in a diversified stock portfolio earning an average annual return of 7%, which is compounded by reinvested dividends, can develop to well over $38 000 within 20 years.

Still, it is worth mentioning that investing is more dangerous than saving in a bank account – which is stated in option D – but investing is typically more useful for long-term financial goals, whereas bank accounts are suitable for short-term needs or emergency ones. It means that the best decision should be made regarding risk and the potential reward following the key principle of saving and investing which is a risk-reward ratio to everyone’s financial objectives and risk appetite.