Why And Where To Invest The Money

Why And Where To Invest The Money

Why and where to invest
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Life makes innumerable demands from us. Whether it is family, freind or self. Ultimately woven into these inescable truth that money is the pivot where everyone turns and plays a vital role in life proves that money is a means to many an end.

Whether it's A dream house,  child's education, vacations, means and luxuries money is  a prerequisite requirement and Investing it is a must.

Investing is the art as well as science of wealth creation.

If you want to build your wealth, you have to make your money work and to make your money work, you have to invest your money in various asset classes to generate returns and achieve your investment goals.

A good investing instrument(asset class) has the potential to give you a strong rate of return and at the same time can gift you unexpected returns against the traditional returns of the market.

If you don't invest your money, you are truly making your money lazy Instead of making it to work for you and missing out a lot of opportunities in the way of wealth and fortune creation.

Investment is done keeping in mind the financial goals, time horizon, risk appetite and many more requirements of the investors.

Investing has plethora of benefits.


Why to invest ?

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Wealth creation : Investing your money can help you grow your corpus. The returns and the capital appreciation helps your money to build, create and generate wealth over time.

Fight inflation : Investing money is necessary to survive the increase in cost of living and to cop up against the inflation.

To achieve Financial goals and aspirations : Investing can help you meet your various financial goals and the returns can be used to meet financial goals and aspirations like buying house, car, childs education, personal finances and may other.

Secure future : Investing your money can help you to develop strong secure future against many risks, uncertainties, emergencies and financial crisis.

Where to Invest the money ?

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Before investing your money. The question that comes in mind is that where to invest? 

Before investing in any asset class an investor must keep in mind the financial goals, time horizon, risk appetite and other requirements.

For investing there are different asset classes ?

First let's understand what is an asset class? 


What is Asset class ?


An asset class is a category of investment with particular risk and return possessing characteristics.

Let's me give a glimpse of different asset class where you can invest your money.

The different asset classes to invest your money.


Fixed income instruments



Fixed income instruments are those investments that generate a specific and fixed amount of income or return over a certain period.

Fixed income instruments are low risk and low return investments.

They possess very limited risk to the principle amount invested and the return is paid to the investor as "interest".

There is safety and security of the principle amount invested.

Some of the fixed income investment includes :

  • Bank fixed deposits (FDs).
  • Government bonds .
  • Corporate or company bonds .


What investors must know before investing.


Advantages

Investing your money in fixed income instruments protects the capital invested and give you fixed and assured returns.

Fixed income instruments posses liquidity except under certain conditions.

Disadvantages


Investing your money in fixed income instruments can only be a good option if you have a low risk appetite and your risk taking capabilities are not more.

For risk and reward go hand in hand. It is relatively less risky so, lower the risk, lower is the return.

Fixed income instruments cannot be rated as a preferred investment option when it comes to beat the inflation.

It's a preferred investment option for retired personals.


Real Estate 



Real estate investments includes investing in commercial and non commercial land, house, apartments, buildings and other tangible avenues.

Investing your money in real estate can be good choice for wealth creation but it has its own pros & cons.

The sources of Income from real estate investment are:

  • Capital appreciation of the invested amount or the asset.
  • Rental income

What are the things for investor to keep in mind.

Advantages

  • Real estate investments can generate great returns over long term.
  • Real estate investments are safe investments and provides security against the invested capital.
  • Real estate also rewards great side income like rental income leasing and holdings etc

Disadvantages

  • Large amount : Real estate investments includes a hefty amount of investment and they are affordable investment vehicles mainly for high net worth individuals and not for small general retail investors because the cash outlay in real estate investment is large.
  • Procedural delays - The transaction procedures can be complex involving legal procedures.
  • No Liquidity - Real estate investments are in tangible form and are bulky investment and does not posses liquidity and selling your invested asset can be a painful proposition.You cannot easily convert the investment in ready cash fast. You cannot buy or sell at your ease or convenience as it needs, right time and right seller for the purpose to perform the transaction.
  • High Taxation - Real estate investments are liable to high taxation and tax rates on real Estates are very high compared to other investing asset classes.

Commodities



You can invest in commodities by its purchase Iike gold, silver and precious metals in the form of jewellery.

Investors can also invest in commodities through exchange traded funds( ETFs).

Investors can invest through mutual funds that invest in commodities .

Mutual Funds


Mutual funds investments has catched a lot of eyeballs and attentions from a great mass of investors.

Mutual funds have given supernormal rewards like what equity has given to the regular investors.

Mutual funds are investment vehicles for those investors who do not know much about direct equity investing

As per your needs you can invest in various funds like :-

  • Equity funds
  • Debt funds
  • Balanced funds 
  • Other funds


What are the things for investor to keep in mind.

Advantages


The risk of fraud is minimal in mutual funds because of strict regulations and supervision.

Superior returns

Investor can start with small investments amount .

Investors get assistance and expertise of professional management.

Investors benefit from asset allocation with a diversified portfolio.

Mutual funds offers liquidity.

Mutual funds are generally tax saving schemes and offer tax benefits.

Disadvantages


Fluctuating return


No control

Also Read : why to invest in Mutual funds 

Equity




Investing in equities means buying shares/stocks of the companies that are listed
on the stock exchange. These shares/stocks are traded in the stock market by the individuals as well as firms.

Investors can invest in equity through primary market IPO or through secondary market or indirect through equity mutual funds.

Equities are the best asset class for stellar rewards and supernormal returns.
Equities are subjected to many 'rags to riches' and 'riches to rags' stories too.


What are the things for investor to keep in mind.

Advantages

Equities can give you mind boggling returns and can generate enormous wealth in the long term.

Equities provide liquidity and the invested amount can be converted, sold and can be converted to ready cash easily.

Equities gives ownership rights in the company you are investing your money.
Equities gives best returns in the long run and holds great compounding effect power and saves taxes too.

Disadvantages

Capital is not safe in equity investments.

No fixed returns.

Equity is highly volatile investing instruments and prone and exposed to fluctuations.

Conclusion

How to invest


While there are many asset classes where you can invest your money and create wealth and generate returns.
An investor must choose his/ her asset class on the basis of various parameters like financial goals, risk appetite and time horizon in order to become a successful investor.

Authored by : 

Prashant Kumar Mishra
Founder of  Finomenal Wealth






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5 Comments

  1. Perfect! This is a question which a lot of people ask when they start earning well. I was thinking about investing in land because as that will be beneficial. Also, I wanted to know about Balance Advantage funds as a friend of mine thinks they are better.

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  2. Thank you for the post and it is very interesting to read. We can also enroll our name in such a good place like Stock Market Courses in Delhi for the bright future.

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  3. Nice blog... Before choosing the mutual funds make sure that they are perfect and suits for you. Only then you could make money otherwise you may fail or lose your money.
    how to invest in mutual funds
    Best financial advisors in Chennai
    Best Financial Planners in India

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