Investments is a way to make money. As each day passes by, we fail to notice the financial responsibilities that may arise unannounced. As we spend morning to evening in offices, schools, colleges, etc. we do not pay attention to the unconscious stress that we under ago in daily lives. We don’t generally consider or plan for a situation that may need urgent funds and your family might not be around to help you. Just take the example of the current scenario of lockdown due to COVID-19. Employees are laid-off, salaries are cut, and recruitment is on halt. Even until mid-march, no one thought that this pandemic would take such a drastic turn, where the entire world will come to a standstill. Malls and multiplexes which were continuously running from their inauguration are now closed. No one had foreseen such an event. Are those employees sitting home and enjoying the lockdown without their jobs, not really, I think. The very constant thing on their heads would be how they are going to pay their rents in the upcoming months. Even when the lockdown is lifted, companies would not start recruiting immediately. Hence if these people had their finances planned they would have to worry, at least not for a living.
Money Budgeting ? Meh!!!!
When we start discussing budgeting, people tent to snooze it, they avoid the topic and tent to procrastinate the discussion even when with their parents. Parents always emphasize saving and budgeting our expenses but they never explained to us why. So we never understood why we should plan to our expenses and to save on that matter. Since childhood, we spend without the worry for tomorrow or planning rather. Having money is a great thing, that feeling’s great, we are aware of it from our childhood and spending it, even better. What is not understood that while spending it, we also need to save it for tomorrow as well! So how to make a budget? It is simply putting down all your expenses including expenditure like rent, food, bill, EMIs, etc.
Also, including investment sections in your budget is important and not just in bank accounts to get some minimum interest, to make it work for us. That’s where investments come in.
Investment , man’s companion for life!
Earning money is the easy part. Making the same money to earn even more is the part that not many can do. Investments are those calculative purchases make today, not to consume but to use in the future to make wealth. One of the initial objectives is to grow your money. The far most important reason for investment is to fight inflation. Other than that, one can potentially just be saving of retirements or to start a new business or he has certain goals set out, let say a house or a new car or perhaps further education. These goals require not just savings but investments as it adds more to the amounts. Taking a loan is fine but paying excessive interest on it something I’d call foolish. Then the only answer to these big fat purchases is careful investments. Investments may not just be used to start new businesses but if you also to expand existing ones. Once you have your money growing you can even venture into businesses you feel are worth your money. The options are endless when you have money, o means you can only eat enough. Here comes the question of how can how you invest your hard-earned money into an unknown source, as we have grown listening investments are subject matter to market risks. Well, that only applies to market investments but let’s not forget the coffee can investments. There are numerous ways in which one can invest and grow their wealth.
Here some simple ways you can invest your hard-earned money and plan!
Deposit Money in Savings Accounts
Savings accounts are the account in which you store your money and use it for transactions. It is the most basic form of savings and not a medium for investments. Sb Accounts do not offer a very high rate of interest and hence is not an ideal form of investments. Savings accounts should only be kept for transactions and to receive and spend money on other sources.
Bank Deposits are one other way to secure your savings in a manner that even you cannot use it for the time being. Here are two basic types of deposits that banks offer. Fixed deposit and recurring deposit. In fixed deposit or FDs, you put a certain amount of money (more than the minimum) in a deposit that is locked in for a specific period ranging from seven days to ten years. Depositing money in a fixed format offer a higher rate of interest than normally putting money in saving account.
Similar to the FD is the recurring deposit or RD where you select a certain amount and a certain period for lock-in. The only difference in RD is that you have to give that amount every month (which is automatically deducted from your account). This is a great way to ensure the safety of your money. However, the interest offered, by both, FD or RD, is not very high. Though there is no risk involved and there is lesser liquidity.
In easy terms, it is an account in which you can deposit money in manipulative or fixed intervals, which earns you a rate of interest which is higher and better than a savings account. One individual can hold only one of each type of provident fund accounts. There are various types of provident funds.
A PF accounts are not meant for transactions and hence have a lock-in period of a minimum of fifteen years and can be extended for five years in a go. In the current scenario, PF accounts offer a rate of interest of seven to 8 percent differing from bank to bank, type of PF, and are set by the RBI. In one financial year, an individual has to pay a minimum of five hundred rupees and a maximum of up to one lakh and fifty thousand rupees. Further, the amount received at the end of the PF tenure is tax-free and the deposits made in this account are also exempted up to the limit of deposit.
One of the highest return gainers is the equity. Equity means the shares that have been listed in the stock exchange by various companies for the general public to invest in. Investing in equity is not as easy as it sounds. An investor must be well informed before investing in any shares. One major thing to understand in the stock market is that it is mainly run on sentiments and hence is highly volatile. Nevertheless, investors make planned and studied investments that earn them huge returns. This platform of investment has high risk but as they say, higher the risk, higher the returns. Apart from these facts, one can also invest in companies that would make profits indefinitely for long term. This way one can be assure make his money will yield some return tomorrow, if not today. This is generally referred to as coffee can investing.
In general, not every individual has neither the time nor the brains to figure out the rocket science behind equity trading or the stock market and hence they entrust this crucial task to others, just like outsourcing a project. These crucial tasks are undertaken by those called fund managers who are well trained and educated in the specific field. These fund managers carefully study the market and diversely invest your money, so that even is one company or industry suffers loose, you won’t lose a significant amount of money.
Very similar to recurring deposits, SIP or systematic investment plans are monthly deposit to a particular chosen mutual fund that is managed by the fund manager. Similar to an RD, the instalment for the SIP is automatically deducted from your bank account, perhaps with a reminder.
In either case, direct mutual fund or SIP, the fund manager takes a certain percentage of your profits as his charge, so you can sit back and relax because he will not compromise at the percentage of profit since that’s what he gets.
Though it sounds orthodox investments make in golds are paying off many tones. I cannot be denied that the price of gold has risen exponentially since the early 1990s and is still growing. Though many economists say that this phase will not be continued for a very long time and hence as for now investing in gold is not a very wise idea. But hey, would know maybe the prices skyrocket again in a couple of decades.
The option with the highest return is starting your own business or venture with a partner. The returns could be astonishing as there could be very high profits but one cannot forget to consider that these profits will only come if the business succeeds. And hence as quoted earlier that high risk yields high returns, business is one of the investment options which will yield the maximum returns. Even if not wanting to take a huge risk, start from something small, with clear cut goals and knowledge to run the business or willing to pay someone who can run the business for you. However, these decisions must be taken with extreme care and experience as the money involved is quite high and carries great risk.
Links Used to Write this Article
Unconscious Stress – https://www.sciencedaily.com/releases/2016/08/160809095307.htm
Enjoying at home – https://www.futurelearn.com/info/blog/50-free-things-you-can-do-during-lockdown
Not knowing why to save – https://www.fox5atlanta.com/news/parents-arent-teaching-their-children-to-save-money
Investments – https://www.investopedia.com/terms/i/investment.asp
Wealth – https://en.wikipedia.org/wiki/Wealth
Objectives of Investments – https://www.allbusiness.com/top-10-reasons-to-invest-money-93916-1.html
Rate of Interest of SB Acc – https://www.myloancare.in/saving-account/
Financial Year – https://en.wikipedia.org/wiki/Fiscal_year
Fixed deposits – https://en.wikipedia.org/wiki/Fixed_deposit
Recurring Deposits – https://en.wikipedia.org/wiki/Recurring_deposit
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