How to invest to build wealth and secure future

Everyone knows about “Importance of Saving” in early age. But what is next? You have to take next step – to invest those saving in best way  you can.

Investing is about making your money, work harder for you and helping you to fulfill your dreams and achieve your goals. An investment can be simple like as term deposit in your bank or investment portfolio that includes shares, property, cash, fixed deposits. it is not just for people who are already wealthy or for those who are soon to retire. Regardless of your stage in life, knowing more about the basics of investing can help you to secure a better financial future.

   

What are the investment basics ?

Investing and saving are  the means by which you can achieve your financial goals and life goals.  Now the question arise here:-

what is an Investment? 

Investment can be defined as the use of money to generate income. The expectation of a future return is what separates an investment from other purchases. What all investments have in common is that they involve committing money today with the aim of producing a return in the future. To invest effectively, then, an investment plan is essential. If you take the time to make a plan and have the discipline to follow it, the rewards are well worth the effort.

Diversification

‘Diversification’ is an investment technique that mixes different kinds of investments in a investment plan.

An ‘investment plan’ is a group of assets, such as cash, shares, bonds or property, held by an investor. To reduce their investment risk, investors tend to hold more than a single asset. A diversified investment plan, on average, poses lower risk than a single investment within a portfolio.

Risk and return

There is a link between an investment’s return and its risk.

Some investments, such as deposits in bank accounts, offer relatively low returns, but are regarded as very low risk. Others, such as shares, mutual funds  offer high returns, but also have risk factors.

It is always important to calculate the risk and return characteristics of an investment in deciding whether that investment is appropriate for you or not. An investment that is best for one investor may not necessarily be right for other investor. Investment differs investor to investor.

Compounding

A popular phrase used in the financial press is the ‘magic of compound interest’.

‘Compounding’ is the process by which an investment will increase in value by ever-greater amounts each year, if interest paid on the investment is reinvested. While the interest rate itself may not change, the amount of interest grows as it is being earned on a larger sum.

Making an investment plan or Financial Planning

There are so many steps for making an investment plan or Financial Planning. The first thing is to know about your current financial circumstances. The second thing is to decide your investment goals and personal objectives.

Once you have set all this, you can consider what investments will best help you to fulfill your dreams.

·         How much money do you have to invest?

·         Do you need access to your money?

·         How much risk can you tolerate?

·         Finding the right investments

·         Managing your investments

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