What is investing?
Put in plain terms, investing means putting away some part of your assets, generally money, in hope of more returns in the future so as to beat inflation and generate better returns. Simple, right? Bear with me. Investing is also about being careful enough to choose the right place to invest.
You might not believe but the first step is not “Investing”. The first step is “Budgeting”. It means you write down your monthly income, monthly expenses, and financial goals, time frame of each financial goal, your savings and your investments. You also mention how much Insurance you have, like Term Insurance, Health Insurance, Travel Insurance, Home Insurance, etc.
Once you know your financial goals, time frame to achieve them, your income and expense levels, you can decide your risk appetite. Your risk appetite basically means how much risk you can digest or handle.
Then comes Investing money! Ensure you have Insurance too! Coming to Investments, there are a wide variety of options out there. Some of them are:-
1. Public Provident Fund
2. Employee Provident Fund
3. Equity Linked Savings Scheme
4. National Pension Scheme
5. Mutual Funds
Before we get on to that, lets know what a real investor or a sensible investor does.
A sensible investor doesn’t go with all the hot debates on top performing stocks, newspapers, articles, and so on. He/she does his/her own research diligently, invests where it is necessary according to his research and lets the money work for him/her. Investing, by such people, is done only when there is realistic expectation of high returns. In other words, they are pragmatic and rational in approach. On top of that, they are patient enough to wait for what right. Get Personalized Advice On Mutual Fund From Smart Financial Advisor, Kuber Mindz or Give A Miss Call On 022 6211 6588
By investing, you take advantage of the power of compounding. Like every drop of water contributes to the making of the ocean, every paisa contributes to earning extra value for your future.
Commencing early takes you a long way, due to power of compounding. Starting early allows you to give more time for wealth to grow. Moe time means more returns.
Let’s now know what a Bond, Stock and a Mutual fund is.
A Mutual Fund is a collection of assets such as stocks and bonds, which is collected and managed by a fund manager. Money from varied investors is pooled and invested in several securities like stocks, bonds etc. You get returns based on how much your investment has performed.
A Stock is Equity or a Share, which lets you become a part owner of the business. This entitles you to receive any profits (called dividends) earned by the company. Stocks are volatile in nature. They fluctuate on a daily basis in value. There is no guarantee involved and is highly risky. There is more risk, so there are more returns.
A Bond is a Fixed Income Security. When you buy a bond, you lend money to the company or government, in return they agree to offer you interest based on your money and eventually pay back your money. There is little risk, so there are little returns.
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