You got your pay-check in the end of the month. Congrats!! But now what? Either spend it or save it. Now, you know the things on which you want to spend the money. But a lot of people don’t know how to save money in such a way where the money they saved does not lose its value but in reality let it increase. Now, you must have this in your mind – How?
Simple, through investing it. There are four different areas where people usually invest in our country. First is Savings Account, second is Fixed Deposit, third is Gold or Jewellery and the last is real estate. Another way is investing in the stock market where the risk is comparatively higher.
Every investment contains three aspects viz. Return, Time and Risk.
Return is basically the profit you actually get through your investment and make sure that the profit percentage is higher than the inflation rate in your area otherwise the investment that you make would not make any sense.
Risk is about the chance of how much money can you lose through your investment. What are the chances of going in loss after investing in certain area , this mainly come under the risk aspect.
Time is about for how long are you planning to invest.
Savings account has the minimum risk with no restriction. You can take or save your money at any time. But the return is something in savings account which you have to compromise. In simply words, ROI ( Return In Investment ) in this case is low.
Fixed deposit is also another less risky option but there is a time limit here in which you can not take your money out. But the return here is slightly higher than that of savings account.
There is no risk in investing in Gold and Jewellery but ROI is not confirmed as their prices fluctuate a lot.
Investing in real estate depends on a lot of factors especially the area. There is a low to moderate risk in investing it. As the fluctuation of prices prevail here as well. You need a lot of capital as well in order to invest in the real estate.
Investment into the stocks may lead to higher return and higher loss as well. It depends on the stock in which you are investing.
It is advised to invest in multiple arenas in order to avoid higher risks.
What are Mutual Funds?
It is a special kind of investment through which you can invest on different types together. It is a better way of diversifying your investments by investing in a one place.
An asset management company collects money from different investors. Afterwards, it invests that money in different places. The collectively return that it gets is given to you after deducting small percent of it for the company itself. A lot of organisations have their own asset management companies. The risk and return all depends on which kind of mutual funds you are investing in.
Types of mutual funds:
There can be different types of mutual funds according to the places on which asset management company is investing.
Equity Mutual funds:
In equity mutual funds, money is invested in the stock market. In this category, generally risks and return both are high. If the investment in big company then it is called large cap equity fund and so on.
Diversified Equity Fund:
Here the investment is done in the large cap, medium cap and small cap companies simultaneously or it is done in different companies.
Equity Linked Saving Scheme (ELSS):
In this scheme you can save your tax that you get in the profit. The fund manager purposedly invests in the places where there is large return and large risks.
Index funds are passively managed fund where no agent of asset management company looks for the places to invest. The return on these funds depend on the market price.
These are mutual funds which are invested in debt instruments like bonds, debentures and certificate of deposits.
What are bonds?
When government borrows money from people as loans then that is called a bond. The government will return the money to you with a fixed interest.
Hybrid Mutual funds:
In this type, the money is invested in both equity and debt mutual funds.
For investing the money, you should gather the complete information about the type of investment you want to make first. Afterwards, make the right decision. But don’t let your money to sit idle in the banks.