Monday, 16 August 2010

How to invest money and where to invest?

When you spend money to acquire an asset with an idea to make profit in future, it is called investment. These assets may be movable, immovable or other financial instruments. If your intention is making profit from the asset, it is investment. This profit may be the profit when realize the asset or rent by letting out the asset or any appreciation of the asset or interest from such assets. Investment plays an important role in financial planning. Many reasons it is important for every human beings. Most investments give out big revenue than a mere saving. But if you do not act wisely you won’t get any return from investments, rather you vanish your hard earned money.

First of all you must be aware that how to invest money and for what purpose you are investing money. There may be a future plan for you to invest money. It may be the higher studies of yourself or your children, marriage of yourself or your children, buying a house for you, for the retirement of you and your spouse, or transfer the money to your kids or spouse after your death etc. etc. Let us learn some important points before go for an investment.

Time factor of Investment

According to the duration of money held up in investments we can classify the investments in long term and short term investments. In long term investments money will be held up for a long time and you may get a regular income such as rent, interest or dividend and for short term investments the money will be held up only for a short time from a few hours, days, weeks or months and can get profit in the

form of short term capital gain or interest. The investor should decide that the time lag of money in each investment according to the requirement of the investor. If your requirement is for a recent time you should go for a short term investment. If you want the money only after a long while you may opt the long term investments. Some investments itself can treat as short term and long term. I mean whenever you require you can dispose or redeem it and can convert it to liquid money.

Risk Factor of Investment

This also a considerable fact that how much risks an investor can take for his investment. Some investment has high risk and it is not sure that the investor may get back the whole or part of the amount invested in. The profit also has the same nature of uncertainty. Shares of companies and some perishable commodities also can be included in this category. Some investments have only very low risk and some have no such risk. Mutual funds and preferential shares can be included in low risk categories. Government securities and fixed deposits in recognized banks can be included in no risk categories.

Where to invest?
AT present you can see so many options to invest and most of them are decorated with an attracted terms and outcomes. But when you invest choose investment plans wisely. Remember that past performance may not be repeated in future especially for shares, mutual funds and unit linked insurance plans. Learn everything with an analytics view from different angles. You can ask guidance from experts or friends and take a final decision yourself.

Real estate - When you invest in real estate you can get the appreciated value at the time of resale and you can collect rent if you’re letting it out. For buying real estate also you should study all aspects and mainly the reliability of the title. In my view point when you purchase real estate do not give all money out of your pocket, besides get a loan from any recognized finance institution for at least a portion of the cost price. They will check the title of the property and only if the tile is clear they will sanction you the loan. In some places it is not easy to know the accuracy of the title. Consider all other factors also.

Gold and other precious metals, Mutual funds, Stocks and shares, preference shares, debentures, fixed deposits, government securities etc. etc. are various other options. Retirement plans also good option for investment.

You invest anywhere else, but keep in mind that you do not deposit all your money in one investment plan, even if it is a secure investment plan or not. All your efforts will be vanished if the plan fails. So invest wisely and wish you a profitable investment life.

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