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Investment

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Investment

There are two concepts in the financial industry, on which many transactions take place. They are Savings and Investments. When talked about execution, there is a big difference between both the concepts, though.

Here we are going to discuss the second concept of the financial industry, i.e. Investment

Before we begin with the concept of Investment let us first know what investment is.

What is Investment?

In the financial context, investment is any money or fund that you spend today to reap financial benefits in future. Any investment made by you is an act to create or buy assets expecting a return in form of capital appreciation, interest earning or dividend. This return is profitable in comparison to the funds invested in the initial stages. You can differentiate almost all the investments from various other types of transactions depending on the intention of spending money. The money you spent on making an investment is basically with the intent to obtain some kind of return in a certain period of time.

Types of Investments

  • Short term Investments
  • Mutual Funds
  • SIP - Systematic Investment Plan
  • ULIP - Unit-Linked Insurance Plan
  • Pension Plans
  • Long term Investments

short term investments

Any investment made for more than five years is a long-term investment.

Mutual Funds

It is an investment scheme, generally run by an asset management company. This company combines a group of people investing the money in bonds, stocks and other securities.

SIP

It is an investment allowing you to make an investment of a certain amount at regular intervals of time.

ULIP

ULIP is market-linked product aggregating the best insurance and investment.

Pension Plans

A pension plan is a type of investment plan that helps you to save part of your earnings to store over a term & later provides a steady income for the golden age i.e. after retirement.

Long term investments

Any investment of a duration of 1 to 5 years is a short-term investment.

Benefits of Investments

Investment, being one of the most significant aspects of the financial planning, intends to ensure that the money you earn is put to productive use. It is profitable and a good way to gain extra cash. By making investments in several financial products you can grow financially. One thing is going to happen for sure and that is with each passing day inflation is rising. The reason for this can be explained with an example. Suppose you have Rs. 1000 and this value of money will decrease 5 years down the line as opposed to its value in the present day. Same thing applies to the value of Rs. 100 five years ago in comparison to its value at the present day.

Therefore, it is significant to know that only savings cannot help you achieve your future financial objectives. Any common man or investor needs to make sure that his money also grows along with his expenses. You can define investment as an activity that affects the use of money in such a way that it comes back with profitable returns in the future.

Apart from this, there are several benefits of investments. They are:

  • If you make investments, you will harvest returns out of it that will help you with emergency expenses like any medical expenditure, accidents etc.
  • Making investments in different financial avenues makes sure that the money you have invested grows rather languishing in bank accounts.
  • You can earn income from your accrued wealth by making investments. For instance, you can earn rent from investment in real estate or earn a dividend from investments in stock markets.
  • One of the chief reasons to make sure that your money grows is fighting inflation. The value of the amount of money diminishes with the rise in inflation. You can tame the effect of inflation rate in depreciating the value of the assets by making investments and producing returns on the corpus built by you.
  • You can also avail tax minimisation, which is a secondary financial goal, by making investments in investment tools.
  • You can plan and fulfil distant financial goals, whether it is a short-term goal or long-term goal by making relevant and intelligent investments.