Investing means putting money to earn more money for you, it is a plan to secure one’s future and beat inflation in the long run. It is a practice in which an investor invests or assigns funds or capital to any endeavor with an expectation of generating returns or benefits. If to be explained further anything that generates even a return f 1% is considered as an investment.
“In simple words, investment is parking your money into something with an expectation to get good returns in the future”.
If you are not investing, then you are left with two options-
- Either you will spend
- Or you will be keeping cash under the mattress and safe in your almirahs.
In the first case, you are going to have fun, spending money and buying things until there is no happiness left, you can’t be happy for a commodity for long and the value of any commodity decreases with time. In the second case, you might be able to save a lot of money, though it will not grow but the inflation will rise which means money today will buy less in the coming years, the purchasing power of money keeps on decreasing.
So, it’s best to invest and when you decide to do so there are many options as such –
- Stocks
- Mutual Funds
- Bonds
- Real Estate
- Saving Accounts etc.
Following are the points which clearly explains all the benefits of investing.
- Gain Financial freedom: In the growing lifestyle, people want to be updated with the latest fashion and technology, want a secure future for themselves and their family for which they require enough money in their hands that is one should be financially independent. Saving or investment is an effective option to gain your financial freedom. It not only gives financial freedom to an individual but also lessens their burden for the upcoming future expense for example expense for best education to their child.
- Beat Inflation: The long-term investment plans are the most effective and appropriate measure one can go with to beat the inflation rate. Inflation decreases the value of the penny saved from the time it was earned for example if a person earns Rs 100, then its value just after a year decreases to Rs 92 if it is not invested and the inflation rate is 8%, however, the investment returns are more prevailing than the inflation rate.
- Enjoy the Power of Compounding: The key feature of an investment is that it is calculated based on the compound interest which only multiplies the returns of long-term investment.
- Get Tax Benefits: People should be aware of the fact that with investment not only they can save money but also can save their income tax. Through investing in many governmental schemes such as Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS), Unit Linked Investment Plan (ULIP) and many more, investors are eligible for the deduction in their income tax under the section 80C.
- Generate Passive Income: Passive income is the capital that flows regularly and doesn’t require a specific amount of effort to create it. Through investment, investors along with their active income can also generate passive income. The best investment option that generates the passive income is investing in real estate, dividend stocks, index funds and many more.
Most importantly just a mere risk in investment cannot overtake these benefits of investment. Although it is said that in investment, lower the risk, lower the return and higher the risk, higher is the return.
(Source: Various web sources)
*The write up is on best effort basis and the author doesn’t guarantee about its correctness. Any investment made based on this information will not make us responsible for the same.
(Mutual Fund investments are subject to market risk. Kindly read all the related documents carefully before investing. Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns)