Templates are used as the basis for documents. It is not an either/or
situation. To use Word most effectively, you will use both.
You create a template that has all of the basic setup for a document, often
including text. Then when you want such a document, you use File > New to
create a new document based on that template. For more on the different
kinds of templates, tabs on the file new dialog, and locations of templates
folders see
http://addbalance.com/usersguide/templates.htm.