April 10, 2018 No Comment. Posted in Financial Literacy

Why do people invest? Why do we need to invest? What is the best way to attain financial security? Is it good to save and invest money for a long period of time to have a financial stability in future? People need financial security for future needs. According to the typical thinking of the people is if you need more money than you need to work more. But is that bunch of money going to be pleasurable if you don’t have the time to enjoy it? You can’t have a clone of yours to work every time for you, so that expansion of money leads to an extension of your working hours. Instead we can invest. Investment is done to make your money work for you and maximize your earning potential. Let’s continue to know more about the best investment options available in India.

There is an old saying “there is no shortcut to success”. Similarly there is no wand that will turn your handful amount to a gold treasure. But if you want try a shot to become wealthy, than you need to do more than simply earn money. Most importantly, you need to hold the money you earn and then you need to grow your money. In order to grow your money, you need to learn how to invest.

When you become an investor, you would probably know and expect that the returns made from the investment portfolio will always add something to your finances. You can rely on fixed income instruments for certainty and stability if the valuation of your portfolio gets higher. Hence, your portfolio must contain a balance of fixed income and debt investment options.

Money helps you to earn more Money. You can also give money to someone to use it for a pre-defined period of time. That money will come back with an interest. Then you can reinvest that interest and principal amount to generate more money.

Real Estate

Real estate-MudrahomeInvesting in Real Estate can make you a millionaire (A Real Life example is Donald Trump), but every time your luck may not work to make you a millionaire by just investing in real estate.

Investing in real estate is a long-term investment that investors invest in for a regular cash flow (the money made from rental properties every month after all expenses are paid). Cash flow will also increase over the period of time because rents increase with inflation while your mortgage payments remain almost the same.

Like any other investment, it’s important to know the risks involved and consider yourself what it takes to be a landlord.

For Example: Invest your money to Purchase Commercial Shop, Plot or Home. (Check Your Maximum Home Loan Eligibility)

While investing in real estate the borrower can also diversify the usage of the money. One can easily borrow the loan on lower interest rates from the a Bank/ NBFC, keep the money in FD’s or invest the same into other modes of investment and can repay the loan amount with the interest received easily.

Fixed Deposit

Fixed Deposit-MudrahomeA sum of money given to a bank or any other financial institution and the receiving entity pays an interest at a specific percentage for the particular time duration. At the end of the time period of the deposit the principal amount and the interest is returned to the investor. Fixed deposits are also known as term deposits.

Each bank or financial institution that offers fixed deposits does not fix its own deposit rates. The deposit rates depend upon the RBI, the financial position of the bank and the conditions that impact the fundraising for the institution.

Most banks offer a loan against FD. By using the fixed deposit as collateral for the loan you can get a loan at lower interest rates. The rates are usually pegged at a few percentage points higher than the fixed deposit. Usually banks advance up to 90% of the fixed deposit being held in a loan.

Mutual Fund

Mutual Fund-MudrahomeA mutual fund is not an alternative investment option to stocks and bonds; rather it pools the money of several investors and invests in stocks, bonds, money market instruments and other types of securities.

Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses.

As an investor, one can easily buy mutual fund ‘units’, which basically represent your share of holdings in a particular scheme. These units can be purchased or redeemed as needed at the fund’s current net asset value (NAV). These NAVs keep fluctuating, according to the fund’s holdings. So, each investor participates proportionally in the gain or loss of the fund.

All the mutual funds are registered with SEBI. They function within the provisions of strict regulation created to protect the interests of the investor. The biggest advantage of investing through a mutual fund is that it gives access to small investors with professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.

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