What is Investment ?

In layman's terms, committing money to some article, business or fund in order to make profits is called an investment. In the world of finance, investment is the process of allocating your money or resources into assets with the intention of making a profit through capital appreciation and capital gain.

Why Do You Need to Start Investing ?

In todayÂ’s world, investments provide an avenue to achieve your financial goals faster by providing many investment options stocks, bonds, mutual funds. Used correctly, these options can help investors beat inflation, fulfil financial goals and stabilize future their financial future. They also provide:

1. A Financial net:Investments in any retirement plan, real estate, stocks, bonds, or mutual funds may build an income which in turn can provide additional financial security.
2. Good Income:By investing in fixed assets, you can build a source of income. An additional source of income is needed during inflation, retirement, or one-time major expenses like education. Some of the preferred options that yield fixed returns are preferred & common stocks and bonds.
3. Increase in capital:Investments help to build and expand business by raising capital. Imagine if you have a startup or planning to expand your company, youÂ’ll need capital. By offering bonds, and equities you can attract more funds in your company.
4. Ease of Liquidity:In times of need, few investments like stocks and bonds can be converted into cash quickly. But you must realise that some investments are more liquid than others. For example, investing in real estate is an astounding way to gain long-term profits, but doesnÂ’t convert into quick cash. So, invest according to your needs.
5. Inculcates a Saving Habit:Investing develops the habit of saving and making the most of your income. From limited income, you have to save up an amount while maintaining funds for all utilities helps you to invest smart and use money wisely.
6. Builds Compound Interest:The earlier you start investing, the more returns youÂ’ll receive to hit your financial goal. Suppose we have two individuals, Sheetal and Neha, both of whom want to save ?1 crore for their child's higher education, which they expect to happen in 15 years. Sheetal starts investing when her child is just born. She sets up a systematic investment plan (SIP) in a mutual fund and invests ?5,000 per month in a mutual fund with an expected annual return of 12%. Neha, on the other hand, doesn't start investing until her child is 10 years old. She decides to invest the same amount, ?5,000 per month, in the same mutual fund with a 12% expected annual return. At the end of 15 years Sheetal will earn approximately Rs 3.1 crore whereas Neha will get a return of Rs 21.7 lakhs.

How to start Investing?

Yes, there are many benefits in investing but before you start your investment journey there are a few factors to consider: You should learn about the pros, cons, and returns before investing in any companyÂ’s stock or in any bond. Check its:

• Liquidity:Every investment has different liquidity. For example, stocks are highly liquid whereas real estate has a low liquidity ratio.
• Tax Implications:Capital gains made on assets are liable to taxes. You should understand how tax can affect your capital gain before investing. For example, as per the Indian Income Tax Act, 1961, the premium amount of life insurance can be claimed under section 80C . The overall limit of exemption under Section 80C can extend up to only Rs 1,50,000.
• Calculate Risk:Investment attracts risk too. There is no guarantee that you are bound to make profits. To reduce the risk, you can choose to invest a small amount at a time or invest in multiple assets to diversify the risk.

Types of Investment

You have a pool of opportunities to invest in nowadays. Your goals are a deciding factor in understanding where to invest. If you want to have a fixed income and donÂ’t want to put any risk, you can go for Bonds, Fixed Deposits, retirement plans, real estate, antiquities and gold. If you are in a position to take risks then you can start investing in stocks, ETFs, index funds, cryptocurrency and mutual funds. While deciding which is the best type for you consider your age, income and financial goals.

Generali Central Life Insurance offers traditional and guaranteed savings plans. Investing in these plans can help you build wealth through constant returns. You can also have a secure post-retirement pension by investing in retirement plans. Long-term insurance plans can also help cover your non-recurring expenses like abroad education and marriage.

Conclusion:

Investments are a good way to build wealth through capital gains, appreciation and returns. However, before investing, it is advisable that you understand the risks associated with a particular investment and decide on a goal for your investments.