Meaning Of Investment
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchase a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.
Types Of Investments
- Direct equity
- Equity mutual funds
- Debt mutual funds
- National Pension System (NPS)
- Public Provident Fund (PPF)
- Bank fixed deposit (FD)
- Senior Citizens’ Saving Scheme (SCSS)
- Pradhan Mantri Vaya Vandana Yojana (PMVVY)
- Real Estate
Reasons To Invest Your Money
In order to build your wealth, you will want to invest your money. Investing allows you to put your money in vehicles that have the potential to earn strong rates of return.
1. Grow your money
Investing your money can allow you to grow it. Most investment vehicles, such as stocks, certificates of deposit, or bonds, offer returns on your money over the long term. This return allows your money to build, creating wealth over time.
2. Save for retirement
As you are working, you should be saving money for retirement. Put your retirement savings into a portfolio of investments, such as stocks, bonds, mutual funds, real estate, businesses, or precious metals. Then, at retirement age, you can live off funds earned from these investments.
Based on your personal tolerance of risk, you may want to consider being riskier at a younger age with your investments. Greater risk increases your chances of earning greater wealth. Becoming more conservative with your investments as you grow older can be wise, especially as you near retirement age.
3. Earn higher returns
In order to grow your money, you need to put it in a place where it can earn a high rate of return. The higher the rate of return, the more money you will earn. Investment vehicles tend to offer the opportunity to earn higher rates of return than a savings account. Therefore, if you want the chance to earn a higher return on your money, you will need to explore investing your money.
4. Reach financial goals
Investing can help you reach big financial goals. If your money is earning a higher rate of return than a savings account, you will be earning more money both over the long term and within a faster period. This return on your investments can be used toward major financial goals, such as buying a home, buying a car, starting your own business, or putting your children through college.
5. Start and expand a business
Investing is an important part of business creation and expansion. Many investors like to support entrepreneurs and contribute to the creation of new jobs and new products. They enjoy the process of creating and establishing new businesses and building them into successful entities that can provide them with a strong return on their investment.
6. Support others
Many investors like investing in people, whether they are business owners, artists, or manufacturers. These investors feel good helping others achieve their goals.
7. Reduce taxable income
As an investor, you may be able to reduce your taxable income by investing pre-tax dollars into a retirement fund, like a 401(k). If you generate a loss from an investment, you may be able to apply that loss against any gains from other investments, which lowers the amount of your taxable income
8. Be part of a new venture
New ventures need the backing of money, and they look to investors for that backing. Some investors may like the excitement of investing in a new, cutting-edge product or service or being part of something like a business or film that introduces them to a glamorous world.