Savings Accounts VS Top Investment Instruments: Key Return Differences

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When making choices about what to do with your money in the long term, for many people, it can often boil down to two main options: saving by making bank deposits into your savings accounts or investing in other selected investment instruments. Knowing the essential differences between these two choices can be the key to securing your future finances and achieving a healthy return.

Each of these options offers different benefits and returns, and choosing between them can be difficult. With that in mind, this TFG blog post provides clarity on the fundamental differences in returns gained from savings accounts and those earned from other selected investment instruments.

What is a selected investment?

Selected investment is a process that involves investing your money with the intention of yielding a significant return in the future. Some investment strategies and investment types involve more risk than others, and some strategies yield higher returns than others.

Which are the main selected investment instruments?

There are many types of financial plans, arrangements, and financial agreements that enable the recipient to gain a monetary return from their investment venture. One example of an investment type is a basic savings account provided by a bank, which usually yields interest on the account's balance. But there are many more types of investment instruments, including:

  • Certificates of deposit
  • Investments in stocks and equity
  • Company bond issues

Saving vs. selected investment – the main differences

Various differences exist between making a deposit into a savings account as an investment option and using a different selected investment instrument. Each offers different pros and cons in terms of the return they yield.

Savings accounts as investment instruments

A savings account can be considered a very safe option for gaining interest on a deposit or an income. Your return is generally less risky by opting for a savings account and is often guaranteed each year by the bank. It's a secure option that enables the depositor to access their funds easily.

Certificates of deposit as investment instruments

As with savings accounts, a certificate of deposit is another type of investment instrument that enables the depositor to gain relatively low-risk rates of interest, provided the deposit remains untouched for a specific amount of time. Before a withdrawal can be made, the length of time is typically upwards of 18 months, which depends on the country in which the bank operates and other factors. This makes it different from a standard savings account.

Stocks and equity investment instruments

Issued by companies looking to raise funds or capital, stocks enable the investor to own a share or part of the company's assets and are offered on regulated exchanges. Opting for a stock and equity investment instrument is not risk-free. It is generally less safe than using a standard savings account, obtaining a certificate of deposit or investing in bond issues.

Bond issue investment instruments

Bond issues are selected investment instruments through which investors can gain an incremental interest rate. Allotted by businesses, governments, and organisations looking to raise money, a bond can be bought by an investor in view of gaining interest and the loan's face value. They are reliable investment instruments through which the lender (you) offers their finances to receive the bond amount back plus interest as a return.

What return can I expect to get from a savings account?

Despite being relatively safe investment instruments, the returns gained from a savings account are usually relatively small. The interest rates you earn, on average, amount to an annual return of approximately 0.9 percent.

A few online banks might offer higher returns – up to 2 percent, but the main downside of investing in a savings account remains the low annual return.

What return can I expect to get from certificates of deposit?

As with savings accounts, certificates of deposit are also safe investment instruments, and the returns you can gain are also low. The average rate for a certificate of deposit lasting 12 months is approximately 0.64 percent. But don't be discouraged. The longer the term you agree to, the higher the amount of interest you can receive.

A certificate of deposit lasting 24 months will give you 0.84 percent interest. Again, as with savings accounts, online banks offer the best rates, and you can generally expect to earn a higher rate of interest compared to regular savings accounts.

What return can I expect to receive from stocks and equity investments?

As mentioned previously, choosing to invest in stocks and equity can be risky. Your returns depend on the company's performance, which directly affects the stock price. This means the dividends you receive could be low if the company doesn't do well, but higher if the company performs well.

On average, stock market returns are historically around 10 percent but bear in mind that there is the potential to lose money as these returns can vary significantly.

What return can I expect from bond issue investments?

Return rates from bond issues vary. Companies that receive their funds from investors will offer an interest rate (known as an interest coupon). As the interest rate you receive rises, the bond will fall, and as the interest rate you receive falls, the bond will increase. Usually, this is because many more investors will be interested in higher interest rate bonds, making it a more competitive investment option.

Some key factors determining the return amount from a bond issue are the bond's rating and the time to maturity. A bond rating can be used to determine a bond's value and indicate the company's capacity to pay interest. A low-rated bond usually pays a high-interest rate due to the risks investors take when choosing them.

Maturity refers to the duration of time that a financial instrument exists before it must be renewed. In the case of bond issues, if the time to maturity is long-term, you are likely to receive a higher yield – but this doesn't mean the total return will be high, which typically depends on which way the interest rates are going.

Comparison of risk and returns for the main investment instruments

Type of Investment Instrument Risk Level for the Investor Return

Savings account



Certificates of deposit


Higher than saving account

Stocks and equity

Can be high

Can be high

Bond issues

Lower than stocks

Can be high

Take control of your future finances

Planning for your future and choosing the right investment instrument can seem daunting at first, but it should be a priority if you wish to fulfill your financial aims and ambitions. Remember, settling for a savings account is not your only option. With TFGcrowd you can make stress- and worry-free investments and plan ahead with ease. Get more information here and find out how TFGcrowd can help you today.