Beginners
Dawn of Financial Wisdom!
What is investment?
“The investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value”- Yes, when we look it up in any dictionary they define it like this way in layman’s language. Let me plot the scene for it.
The money earned is partly spent to meet our daily requirements from food, cloth, shelter to medicines, recreation etc. As it is rightly quoted, India is a saving economy, we save the remaining amount to meet the future expenses. But Hold on! Saving is not investment. You just can’t let the savings lay idle in banks instead you would like to use it to get return on it in the future. This is known as Investment.
Why should one invest?
Yes, this is actually a million dollar question before someone starts thinking about investment. Why do you need to invest?
• As said above, you would like to earn interest on the saved money you have.
• To accumulate a specified amount of money to meet future goals (think about marriage expenses, children education, health expenses, retirement etc.)
• The future is uncertain. To face this uncertainty with a smile, we have to have financial plans with us.
• Inflation – Yes, from a financial analyst’s community it has become a part of every tea-talk now. We will discuss about this in a very detailed way very soon.
When to start investing?
“There is never a wrong time to do the right thing”. Kudos! It applies to investing as well. There are two golden rules to investing. Start Early and Invest Regularly. The sooner one starts investing the better. By starting early you are giving more time to your investment to grow and can actually appreciate the beauty of well known rule of compounding. Don’t know the concept of compounding? No worries. It will be discussed.
What are the various options available for investment?
There are various options available to invest your money in:
1. Physical Assets: Real Estate-Houses or Apartments, Gold/Jewellery, collectibles, commodities etc.
2. Financial Assets: Savings Accounts, Money-Market Funds, Treasury Bills, Certificates of Deposits (CDs), Small saving instruments with post offices, Insurance/Provident/Pension fund, Mutual Funds, Bonds, Debentures, Stocks etc.
We will discuss the pros and cons of each investment asset in our next article with various short term and long term financial options.
To be continued…….
