What is Investment and How to Invest ?

Investment is an asset to generate income or capital gain on amount invested. In finance, an investment is a monetary asset purchased with the purpose that the asset will give income in the future or later be sold at higher price of a profit or capital gain.



Investment is the process of putting money to work with goal to income and increase value. There are lots of instruments like stocks, bonds or real estate which help us to generate income or appreciation in future. Investment decision is mostly depending on the goal behind investment decision, there is vis-a-versa relation between risk and return. If the risk is high then the return is high and on the other hand risk is low then the return is also low.


Types of Investment

  1. Stocks (Like Equity)
  2. Bonds (Debt Instrument)
  3. Mutual funds
  4. ETF (Exchange-Traded Funds
  5. Retirement Plans (Like Annuities)
  6. Certificate of Deposit
  7. Commodities (Like Gold, Silver)
  8. Real Estate
  9. Govt Schemes (Like PPF, NPS)
  10. Unit Link Insurance Policy


How to invest?

Investment depends upon your risk capacity. For example, stocks are highly risky but on the other hand bonds are not much risker so according to risk=return stocks give higher return than bonds. So, the simplest method of investment is according to your age.

Suppose, you are 30-year-old and you want to invest 1 lakh for your better future, so the simple rule is to invest according to your age your age is 30 so invest 30% in debt and 70% in equity, when you turn 35 so change the rule according to your age invest 35% in debt and 65% in equity and so on. Age is equal to percentage to invest in debt and rest of it to equity. This is the simplest rule to invest.

 



On the other hand, you can follow the bellow table according to your age :


   AGE     EQUITY DEBT
 0-25 80%20%
 26-3575%
 25%
 36-4565%
 35%
 46-5555%
 45%
56-65
45%
55%
 65-80 35% 65%

Importance Of Investment ?
  • Outflow of inflation
  • Put your money to work
  • Multiple Financial Resources
  • Reduce Taxable Income
  • Financially Secure
  • Achieve Long Term Goals
  • Plan Your Retirement

Conclusion

Investment is the process of putting your money to buy financial instruments with the goal of future income and appreciation. Investment gives you future income like divided, interest etc. there are lots of instruments to invest like stocks, bonds, real estate etc. You have to invest according to the risk capacity of the individual or invest according to your age as per simplest rule of age is equal to percentage to invest inn debt and rest of it to equity.




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