Hello readers! Good to be back after a long
while.
What would be your instant reaction when you
get an SMS from your bank saying ‘Your account has been credited with Rs.1,00,000’? No doubt, anyone feels elated and happy seeing it.
Next question - Now that you have so much money
with you, how do you think you should use this money? Should you spend or
invest? There are ‘n’ number of ways in
which you can spend money and there’s no need for me to tell, what money can’t
buy today. But do you think it is worth that you spend all the money that you
have earned or do you think the entire amount you have earned should be
invested?
At this juncture I would like my readers to
know the difference between INVESTMENT and EXPENSE.
Investment means putting money into an asset with
the expectation of a reward for parting your money. This reward may be in the
form of capital appreciation, dividends,
interest
or a share in the earnings/profit. Most or all forms of investment involve some
form of risk, such as investment in equities, are subject to market risks,
property is subject to fall in the market value and even fixed interest
securities which are subject, among other things, to inflation
risk.
What is the best type of investment? The answer
to this question certainly varies from person to person and the risk
appetite of that person.
I would like to share a quote here, ‘Higher the
risk, higher the return and lower the risk, lower the return’.
Hence it is essential to assess your risk
appetite before investing. If you are willing to take calculated risks, then do
so with caution, as the rewards may be proportionately high for such kinds of
risky investments.
I would like to elucidate on the different
types of investments and also a few avenues of investments:
1. High
Returns but high risk investments: Shares, Mutual funds etc.
2. Medium
Returns and medium risk investments:
Shares, Mutual funds, Deposits in Debentures and bonds of companies
etc.,
3. Low
Returns but low risk investments: Fixed Deposits in Scheduled Banks, Investment
in Government Bonds etc.
With this I think I have given a brief view
about investments for beginners.
Next comes Expense, which I will explain in my
next blog.
