Investing: Why is it important? Where can we invest money?

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Investing is a way to increase your financial wealth theoretically. The aim is to purchase economic goods, also known as investments, and then sell them for a higher price than you paid for them. When you spend, you’re buying goods and putting your money in a designated account.

Why is investing important?

Investing is essential if you want your money to work for you. You work hard for your money, and it should return the favor. On the other hand, the bank is not breaking a sweat by paying you to keep your money in their vault. It is your responsibility to put your money to work. Investing is one way to take control of your financial future. It allows you to increase your wealth while still allowing you to grow an additional income stream after retirement.

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To achieve your objectives, you must invest. It’s the only way to improve your prospects. You are also supporting and accumulating a fund for a rainy day by making investments. Aside from that, making daily investments allows you to set aside money regularly, which helps you develop financial discipline over time.

Inflation and Impact

Inflation is an increase in the cost of goods and services. It lowers the value of your money and reduces your buying power. When the rate of inflation rises, you can purchase fewer items for the same amount of money. The rate of inflation is beyond your influence.

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Where can we invest money?

The very first step to investing money is to start as soon as you can. It would help if you got your investments underway as quickly as possible. Time is money when it comes to investments. Starting as early as possible will help you get a higher return at your retirements.

There are various investment options available to you. However, you must be sure that you are only investing in options within your risk tolerance and meeting your needs. Here are some investment opitons:

  • Mutual Funds

Mutual funds have been around for decades and are becoming increasingly common among millennials. A mutual fund is a type of investment vehicle that pools money from various individual and institutional investors who share a common investment goal. The pooled funds are managed by an investment specialist known as a fund manager, who invests in securities and assets to provide investors with the best possible returns. They are divided into equity, debt, and hybrid funds. 

  • Direct Equity

Direct equity, also known as stock investing, is by far the most influential investment vehicle. When you purchase a company’s stock, you are purchasing a portion of the company’s ownership. You make a direct contribution to the company’s growth and development. To get the most out of your money, you’ll need plenty of time and business awareness. If not, direct equity investment is as good as speculating.

  • Fixed Deposits

Fixed deposits,aka, FD are a form of investment offered by banks and financial institutions in which you deposit a lump sum for a certain period and receive a set rate of interest. FD`s, unlike mutual funds and bonds, provide complete capital security and guaranteed returns.

  • Recurring Deposits (RD) 

A recurring deposit (RD) is another fixed-term investment that allows investors to spend a set amount per month for a set period while earning a fixed interest rate. RDs are available at banks and post office branches. The interest rates are set by the organization that is providing the loan. An RD allows investors to put a small sum of money aside per month to create a corpus over a set period.

  • Public Provident Fund(PFF)

PPF (Public Provident Fund) is a long-term tax-saving investment vehicle with a 15-year lock-in clause. The Indian government supports it, and the sovereign backs your investments. The Government of India adjusts the interest rate provided by PPF every quarter. In possession of the lender, the corpus withdrawn after the 15 years is entirely tax-free.

  • Employee Provident Fund(EPF)

Another retirement-oriented savings vehicle is the Employee Provident Fund (EPF), which allows salaried individuals to benefit from Section 80C of the Income Tax Act of 1961. EPF deductions are usually a percentage of an employee’s monthly wage, with the employer matching the same amount.

  • National Pension Stream(NPS)

Tax-deferred investment is the National Pension System (NPS) is a new option. Investors who join the NPS scheme must remain in it until they retire, and they will earn better returns than those who invest in PPF or EPF. This is because the NPS provides equities-based plan options. The NPS maturity corpus is not entirely tax-free, and some of Tax is paid by this.

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