The ABC’s Of Investing

The money that you earn is partly spent and the rest is saved for a rainy day. Savings refer to the funds that are kept aside in safe custody, such as a savings account. Instead of keeping this money idle, you can invest your savings in various financial instruments which will pay you a hefty return in the near future.

The question that arises now is how and where to invest this money. Potential investors can always take the help of a financial advisor and an investment advisor, both of who are capable of providing detailed knowledge on the subject on investment and investing money. Investors can start investing after fulfilling the following simple steps:

1. Obtaining documents relating to Personal Identification Proof and Address Proof.

2.  Approaching intermediaries like a broker, RM etc.

3. Filling up the KYC form and furnishing the details required.

4. Filling up of the broker-client agreement.

5. Opening a DEMAT Account and linking it with a savings account.

6. As soon as these steps are completed, an investor can start investing in the financial market.

The investment options can be well classified into 2 parts. They are:

1. Physical assets: It comprises of tangible items like real estate, commodity, goldand silver in the form of jewelry and even antiques. 

2. Financial assets: It comprises of FDs with banks, small savings instruments with the post offices, provident fund, pension fund, money market instruments and capital market instruments.

The money market gives the scope of short term investment options. It deals with debt instruments such as bills of exchanges, commercial bills, treasury bills, certificate of deposits etc. These have relatively low risk and relatively low returns. However, they are one of the safest investment options, especially for those investors who want to play safe.

A capital market is an option for long term investment. The various instruments of capital market are shares of companies (equity), mutual funds, SIP investment, derivatives market, IPOS, etc. These have a higher risk and higher returns in comparison to the instruments of the money market. Although stock investing is considered to be more rewarding, the high risk factor associated with it can result in loss if there is a downswing in the activities of a company.

The investment strategies of an individual depend on certain factors, such as:

1. The risk taking appetite of investor

2. The time horizon of investment

3. Expected return

4. Need for investment

Investments make our fund grow over a period of time whereas savings is just idle cash. Our short-term needs can be fulfilled with the help of our savings but for the achievement of our long-term financial goals, investment is a must. This is only possible with financial planning.