Everyone wants to have a financially stable life. If you are an earning individual, you need to plan your life after retirement, or you might have certain goals in mind which you wish to fulfill in the future like buying a house, marriage of your children, foreign vacation etc. Well, one thing which is the prime requirement for almost each one of them is money.
This is where investments come into play. Investment is simple language is putting your money in an asset with the hope of getting some extra amount as investment returns. This return when added to the initial invested capital provides you with a higher sum than what you had. Investments are the key ingredient for leading a financially stable life. You can never have a financially sound lifestyle if you are simply keeping your money idle and not investing it somewhere.
Today, we will take a look at the basics of investment and also find out why should you actually invest your money.
Table of Content
Investment in Financial Market
The Need of investment
Investments are an important constituent of a financially healthy lifestyle. They not only help you in saving and accumulating your hard-earned money but also act as the best way to achieve your goals. Investing regularly also helps in instilling the much required financial discipline in you in the long run.
There is no specific reason required for making investments. If you are earning, you should regularly invest a part of your money, even if you feel that you don’t need it. There are many “rainy days” in one’s life and regular investing will help you in accumulating enough corpus to help you sail through them.
Inflation and Investments
It is a universal truth that with time the purchasing power of your money will decrease. You could easily buy an entry level car for few thousands some 50 years back, however, it takes lakhs of rupees to buy a similar entry level car today. This in financial terms is known as inflation.
This means that if you store money in your locker today with the aim of utilizing it for your child’s marriage, you won’t be able to do so because the costing for the same will definitely rise with time but your capital will remain the same unless you invest it. The return from your investment may help you in beating the inflation rate.
For example, let us consider inflation is rising with a level of 8% per annum, so you need to plan your investment in such a way that you at least earn 8% or more return annually in order to beat inflation.
Types of Investments in India
In India, investments can be broadly classified in two categories – Active Investments and Passive Investments. Active investments require you to alter your investment portfolio regularly depending on the market. This is more suitable for seasoned investors who can dedicate enough time in the markets. It includes assets like stocks, bonds etc.
On the other hand, Passive investments are more recommended for newbies and busy individuals. It requires you to invest once and hardly make any changes to your portfolio for months. Passive investment includes options like bank deposits, National pension schemes etc.
How to Plan Your Investment?
Planning an investment is not easy considering the variety of options available for investors these days. When you plan an investment, you need to consider a number of factors like your risk bearing capacity, your investment goal, investment horizon, income, liabilities etc. It is therefore recommended to get help from a registered investment advisor who after studying your profile suggests you with the best investment options available for your needs.
Conclusion
With investment, there is a saying, the sooner you start, the better you get. You should start investing right from your first pay day for having a financially secure future. If you are still waiting for the “right time”, the right time is NOW! Don’t wait any further and start investing now.
Happy Investing!
