Introduction to Investing:
It is widely assumed that an individual who does not invest loses money over time due to a variety of factors, including inflation. Investing is described as putting money with the expectation of appreciation of value in the future.
It is important because it contributes to financial stability as well as the achievement of long- and short-term objectives. If the right decisions are taken and well-monitored, a person can expect to live a decent and stable life. Investing in Stock market, mutual funds, insurance plans, provident funds, assets, and other investment options are available to individuals.
Investing has both negative and positive side being risk and return respectively and they are directly related to each other as in low risk and low return and in case of high risk it is higher returns. They may vary depending upon the asset class or the investment type you are investing in, so it is essential to go through all the details properly before investing anywhere.
Monitoring also plays a huge role when investing is concerned as the valuation of the assets or the stocks as they can be unpredictable due to other economical factors. You can earn money from your investment in two ways it- One, if you invest in a tradable commodity, you will be able to benefit from it. Second, if you engage in a payback scheme, you can earn money through the development of profits.
There are various kind of investments available for people which can be categorized in three categories namely-
- Lending investments: In such investments, we basically investment our money in government or corporate bonds, etc which means that we are lending our money to the government.
- Ownership investments: These investments give us ownership when we purchase the shares or invest out money in stocks, real estate, etc.
- Cash equivalents- In these kinds of investments, the investments can be liquidated easily by the investors.
Under this, there are various options available:
- Stocks- Shares, which are a percentage of a share profit that an investor would buy, are traded on the stock exchange. To put it another way, you spend your money and make or lose money depending on the state of the market. India’s two main stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) (NSE). By opening a Demat or trading account, these stocks may be purchased through a financial institution or a financial advisor. India’s secondary and main markets are controlled by the Security and Exchange Board of India (SEBI).
- Bonds-These are mostly the firm’s or government’s entities, and interest payment are paid when the bond matures and also, they receive interest payments in a fixed period of times.
- Option and derivatives-Options are a segregation of derivatives and gives various other varieties to invest in it. An option is a common derivative that gives the holder the right but not the responsibility to transact a security at an agreed cost within a specific time span. Derivatives are typically leveraged, which makes them a high-risk, high-reward investment.Option trading is a common alternative to make money.
Importance of Savings and Investments:
Savings and investment play a huge role to maintain financial stability to achieve your goals and for future financial plans. These both terms have quite interconnected each other. In case of saving, you keep aside some amount of your money and in case of investment, your money is invested in some of the plans in mutual funds, stocks, bonds, etc. Investment gives you return which helps you to grow your money, but saving does not do that.
With the simple shift to invest the money you save; an individual can earn more and have a more stable lifestyle. Financial goals are met in a fine and easy way but its important to understand that once you have invested your money, it is important to monitor it every now and then depending upon the sensitivity of the same due to the economic fluctuations in the market.
Hence, it is essential for individuals to understand the necessity if investment as it helps to be financially independent.
Why should you start investing now?
It is believed that you should start investing the moment you realise its need and importance as earlier the better. Here are some of the reasons why you should do so:
- Growth of money: The moment you start investing money, you will start earning return on the same and the more the better. Long duration investments also help you to benefit with greater returns which is anyway better than keeping your money at home or just storing it some place else. Also, when the investment is for longer duration, the amount you invest will be small.
- Accomplishment of financial goals:As an individual will start earning better interests and better returns specifically in longer terms, it will help them to achieve their financial goals or plan for their future in a diversified way. It is also believed that nobody can become a millionaire without investing so by this anyone can understand its importance and impact.
- Shareholder benefits:By investing in stocks, a person earns ownership from the company which makes him/her liable for the decisions made by the company and will also help them to grow their business due to it. Hence, you can achieve this by investing in your favourite companies or the once which are safe and profitable.
- Expanding the business: Investing will always help you to understand the immediate need of the market and current market situation. The returns can also help in growing the business. Investors also like Entrepreneurs who are interested and create a good outlook for the people.
- No problem with inflation:As due to investment, your money is constantly growing, you are winning for the issue of inflation as whenever you invest your money comes in being multiplied. Hence, you can always win over the increment and fulfil your goals whenever you want.
To conclude, by this we understand that its never too late to invest. Proper directions, monitoring and a guide to understand the investment will always help you to fulfil your needs and achieve your goals.
Before investing always read all the terms and conditions and study about the investments you are making as investments are never about investing your money blindly but about securing your future.