Introduction
Investing is the act of allocating money with the expectation of raising some benefits after a period of time. One can earmark their money in an asset or commit a fixed amount of capital to a idea, goal, business, or project. It is not only putting your money but also time and efforts into something that can give a long-term benefit. A good investment strategy helps the investor to build and grow their wealth, which can be used in the future. For instance, people invest in mutual funds or PPF to create wealth for their children's education or their retirement.
Understanding Investing
The primary objective of investing is an expectation of returns. The return might be in the form of regular income or capital appreciation. There is a gamut of assets on which one can invest and earn high returns. The most suitable assets for investment is decided on the basis of investors risk profile, market situations, time horizon, and investors source of income.
The investors with a high-risk appetite can opt for equity-oriented assets. On the other hand, the ones with a low-risk profile can opt for debt instruments.
Risk and return-on-investment go hand-in-hand higher returns come along with higher risk and lower returns come with lower risk. Putting your money in a land or a real estate property will also be counted as an investment which can generate your capital appreciation in the future when you sell it.
Factors to consider before you invest
Here are some of the popular investment avenues in India:
- Bonds: Bonds are the debt obligations of entities such as corporates and government. Investing in a bond means that you hold a share of an entitys debt and will receive periodic interest payments. When the bond matures, the investor will receive the face value of the bond as a return.
- Shares: Buying a companys share makes an investor a fractional owner of the company. They are known as shareholders and participate in the companys growth and success leading to a rise in the stock prices.
- Mutual funds: These are the pooled instruments managed by the asset management companies that enable an investor in diversifying their investments in stocks, bonds, or hybrid assets.
