In this article I share what I learned about Investments. In today’s world, merely earning a good salary is no longer considered a commendable feat. A person is judged by society not only by the status that he carried, or by his educational degrees but even more so by the assets that he can call solely his. It is not uncommon today to find youngsters who work in call centers and the like, saving a part of their money for future needs. Even a person who is starting out in his first job, understands the need for investing.
How does one define ‘investment’? It can be defined as putting aside money in something or somewhere in the hope of making more money. The kind of investment our grandparents and even parents might have looked at, would probably not have gone further than investment in a house or flat, putting their savings in a post office, using the provident fund service, or simply putting money in a bank and taking the interest.
Today, however, people everywhere are spoiled for choice. Even the purchase of a car today is looked upon as a serious investment- one which needs a considerable amount of time and thinking before the actual buying.
Investments however can be of three types:
This is where you give some money to an expert who would take care of your investment needs. This works very well in a fast paced world where people cannot afford to spend time on investments themselves. Here the entire authority as to where to invest rests with the expert who would do the needful after consulting you.
This does not mean however that the returns of the investment would be necessarily high. Quite a few business households feel safer putting their money with established investment experts. Mutual Funds, Savings accounts etc are two examples of passive investing.
This is where you, the customer would do all the investments by yourself. This would mean that you have full authority to decide where and when you wish to invest your money. However to be successful at reaping the benefits at an early stage of investment itself, it is important that you stay abreast of all the activities that are happening in the financial market. Having a full knowledge of returns, interest rates, schemes etc is a must to make the right decisions. Active investments are seen more in areas like the stock exchange where buying and selling of shares occurs.
This kind of an investment is usually done only by veterans who know the in and out of investment on the whole. This is where, the investment is changed in some way at a later stage to bring is as much profit as possible. Sometimes, the outcome may be very different from the original idea and is a risk in itself. Huge loans in order to fund such ventures are also not uncommon. Creative investing is usually done with a larger panel of people and rarely happens by just one person. A common example would be property development or a new business development.
Investments are made for both business purposes and for personal reasons. These however are the three main areas in which investing is done :
While assessing the net value of a business, everything right from the number of people hired to the worth of the building is taken into account. Investment in a business is usually done on a large scale and even on a daily basis. The purchase of products, investment into new ventures, hiring of new people etc are all various forms of an investment.
Here, investment involves the purchase of securities, paper assets or even in liquid assets for e.g. real estate. Any purchase is always valuated to find out if the product is actually worth the price paid for it. Other financial investments include equity investment or bonds. Such investments are commonly done using a middle party for e.g. a bank, investment clubs, mutual funds etc. It is always hoped that the asset would only increase in value after the purchase.
Here, it is the individual who is making the investment as opposed to a larger party. There is a difference between the term savings and investment. Savings refers to keeping money aside regularly for eg putting money in a savings account each month. Investments are always done with the purpose of increasing the initial amount invested. Shares and mutual funds are a favorite method of personal investment.
Real Estate is a very dicey business decision which could turn out profitably if the cards are played right. Property is bought either for personal use such as a house or flat, or for rental purposes. However, business names also invest quite lot in real estate, not just for their own expansion purposes but also for the purpose of building and then letting out to other businesses. Banks often step in to provide the capital to make such purposes. The higher the amount, of course the more the interest for the bank.
Although investments are now the preferred method to save a little something for the future, they are not without risks. It is always important to put your money in time and tested ventures and to avoid any start up investments. Understanding any risk involved, the investment itself, and the implications of such an investment are very important to understand thoroughly, even if you have employed the services of an expert. After all, it is your money at stake, and no expert in the world can replace what has been lost.