Start investing in various investment options, when you have surplus funds or a lump sum in hand. With a wide range of investment options available, it’s obvious you would be in a state of confusion, when choosing a suitable investment scheme. You must consult a financial advisor, if you are in a state of confusion when locking on an investment scheme.
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Investing in stock markets is not everyone’s cup of tea. You must invest and trade in stock markets only if you have sound knowledge on how they work. Stock markets have potential to offer returns as high as 25% in no time. You may suffer losses in stocks if you are to invest for a shorter duration. Patience is the key to success when it comes to investing in stock markets.
Investing in stock markets with no or very minimal knowledge is considered to be gambling and banking on luck/speculation. You can consult a financial advisor who is a specialist in stock markets to understand the way stock markets work.
By investing in a company’s stocks, you become a partial owner of that company. When the company makes profits, your portfolio returns increase. When the net value of the company grows, the price of the shares grows. To make profits, you must sell the share at a higher price than the price you bought the share.
Stock market offers highest returns among all investment schemes. These high returns come at a high risk. Investing in stock market is highly risky. It is advisable that only those individuals who are ready to take risk invest in stock markets. Stock markets work on the principle of “someone’s gain is someone’s loss”.
SEE ALSO: How To Invest Money
When you invest in bonds, you are lending money either to a company or the government which shall be repaid by the end of bond term. The company or government that sells bonds pays interest throughout the bond term to the bond investors. If you are investing to save taxes, then tax saving bonds is available. Investing in investment bonds are considered safe.
The frequency of interest pay-outs may be monthly, quarterly, half yearly and annually. There are certain corporate bonds that are listed on stock exchanges like NSE and BSE.
A mutual fund is a professionally managed investment pooled from several investors to purchase securities and invest in stock market/debt market. Mutual fund investors may be retail or organizational in nature. Mutual funds have many advantages which makes investing in mutual funds a better option when compared to direct investing in shares.
There are various types of mutual funds available depending on the amount of risk you are ready to bear. Investing in debt mutual funds is considered the safest. If you are ready to bear risk, then investing in equity mutual funds is apt for you. Mutual fund managers charge a fee that is a certain percentage of your total investment in the mutual fund. If you are investing to save taxes, then you can explore ELSS which is tax saving mutual funds and enjoy Section 80C tax benefits.
Depositing your money in a savings bank account is the safest and least risky mode of investment. Investing in savings bank account offers a rate of return around 4-6% annually, depending on the amount deposited. Low risk offers low returns and this holds good for savings bank accounts.
Investing in savings bank account is hassle free. There is no processing or handling fee charged. You don’t have to keep a check on the performance of your investment. All you must do is invest and forget, and you get a fixed rate of return. This is considered as a passive way of managing investment. The best thing about a savings bank account is that there is no lock-in period. You can withdraw funds whenever and wherever you want.
You must remember that the returns earned on a savings bank account is not inflation beating and the rate of return is always fixed. You must consider investing in savings bank account as the last option or when you have surplus funds after investing in other investment options suiting your requirements and risk taking abilities.
Investing in commodities like gold, silver and so on is a good option. These commodities are highly liquid in the market and can easily be exchanged for cash in a matter of few minutes. Gold serves as a hedge against inflation. Having physical gold is equivalent to having cash in hand.
SEE ALSO: Savings Accounts
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