What is Investment?

What is Investment – Types of Investment, Why, When, How Much and Where to Invest Money?

Learn What is Investment – Types, Why, When, How Much and Where to Invest Money? Best Investment Portfolio Management Strategy.

What is Investment?

Investment is not just an accounting term in economics. It is of great importance in a person’s life and an important part of Financial Portfolio Management Strategy.

“Investment is putting your saved money at the place to make more money.”

We all earn money and have our own expenses. At the same time, we also try to save some of our income for our future objectives. This saving can be kept in bank or invested somewhere to make more money to get rich.

Investing is not gambling. It is all about making wise decision and taking reasonable calculated risks to earn profit and make more money. Investing is a method of purchasing assets to gain profit in the form of dividends, interest, or rentals.

Examples of some good investment options are – shares and equity, bonds, mutual fund, real estate, bank fixed deposits etc.

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Why Should I Invest Money?

In very simple words, everyone should invest some portion of their saving to help the money grow. You investment can shield you against rising inflation.

In order to compete with the ever growing rate of inflation, you must invest in a plan so that it gives a return which is more that the rate of inflation. When the rate of return on your investment will be more then the rate of inflation, then you will have good surplus over a period of time.

You can invest your money in stocks, bonds, mutual funds, real estate or certificates of deposit etc. But your motive should be to create wealth for your retirement, for your future and for other expenses like marriage, higher education and college fees, vacations and so on.

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Learn why I or you should save money from our Income and Invest in Stock, Business, Land and Property, Bank Fixed Deposit (FD) or any other Investment – Top 10 Reasons to Save and Invest.

When to Start Investment?

When to invest money? Well, the answer is very simple. The sooner you start investing money, the more time you allow your money to grow. Early investment means that you are allowing your money to get compounded and multiply. Compounding interest adds to your income by accumulating your earnings and dividends.

Share market is a world of unpredictability. Here are 3 basic and golden rules for all investors:

1. Invest early;
2. Invest regularly; and
3. Invest for long term.

Many people just wait for the “right time” or “best time” to invest. What they don’t understand is that the risk of waiting can be more than potential rewards of early investment. Compounding is a very powerful tool to grow money.

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What is Compounding?

Compounding is growth by reinvestment of returns earned on savings. By means of compounding, you not only earn income on the original amount but also on the reinvestment of dividend / interest accumulated from your original investment over the years.

The power of compounding is one good reason to start investing early. The earlier you start investing, the more money you will make. The longer you leave your money invested at higher the interest rates, the faster your money will grow.

If you plan to invest in share market, then invest in stocks with a long-term prospective. The general upward momentum of the economy mitigates the stock market volatility and the risk of losses.

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Types of Investment – Where to Invest Money?

There are a number of investment options. Following types are few of them:

S. No	Investment Type	Return
1.	Stocks / Shares	Dividend and Capital Appreciation
2.	Mutual Fund	Dividend and Capital Appreciation
3.	Bond	Yield
4.	Bank FD	Fixed Interest
5.	Real Estate	Rental Income and Appreciation

I will explain all the above options in details in upcoming articles.

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For How Long Should I Invest?

For how long should you invest depends on your needs. Do you need the money after 3 months, 6 months, 1 year, 2 years, 3 years or after that period. It all depends on how much time you can spend on investing.

Your investment period also depends on few other factors –

1. How much time can you allocate for the purpose: Are you too busy to give too much time to your investment portfolio? You can give enough time or spend few hours a week or month.
2. When do you need the money?

To decide how much time you must allocate your investment to help it grow, you need to look at various options and how they have performed in the past and how much return have they given.

Most experienced investors invest their money in stocks and bonds for long-term. If you have idea of return on these types of options, you can decide for how long you need to invest your money.

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Investment FAQs

Conclusion

To conclude, I will say that the early you start investing your saving, the  more time you allow your money to glow. Allow the Power of Compounding to grow your money and secure your Future and Family.

I hope you liked this Article. If Yes, then do share this with others. Thanks!

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