Saturday, 6 November 2010

Facts to be considered while investing

We normally invest our hard earned money. Most of us are not investing from our surplus fund. We make it for our future need or someone else’s future. We want to secure our future or our beloved ones. So we invest money with much difficulty. In such a situation how can we invest? The aim of our investment is to multiply our money and it should be legally. There are various options to multiply our money through investment. But we should take care of some factors which may affect our investment adversely.

How much risk we can bear?

All investments are risky. But the depth of risk is different from investment to investment. If the risk is high there may be a high return also. Just like low risk attracts only a lower return. Have you listen a sign board that “stop a while before proceed”. Here in case of investment also we should wait a short while until we understand fully about the investment we are going to do. Ask your friends and relatives, read more about the investment scheme, search the web for more details and forum posting about the investment. Whatever may be the feedback, you should take the final decision, because it is your hard earned money you are investing. Seek advice of a reliable financial planner and then take the decision.

Liquidity of Investment

Liquidity means when necessary how fast we can change our investment to cash. This is one of the main factors we have to consider before investing. This is according to our financial goal. It may be for the treatment, for the education or marriage of your kids, for purchasing a residential accommodation or for the retirement of yourself or your spouse etc. According to our financial goals and urgency we should make it into liquid cash. So plan your investment accordingly. Experts says that you must keep the amount equal to 3 months normal expenses in your savings bank account and 6 months expenses in Fixed deposits etc., which may switch over to liquid cash easily.

The outcome of our investment

We have to decide how much return we need to get from an investment. Some investments give only a low return and some offer high return. Plan what do you want and pick according to your need. But listen that you must not attracted with high offer from investment schemes. Study well and act accordingly. Some HYIP (High yield investment plans) may claim that one can get rich easily. But be cautious about such false offers and keep in mind that most of such schemes are illegal and finally there may be a big financial loss. Money chains etc. are such schemes which you should not go for. When you invest you must consider not only your financial future but the financial well being of the society and nation. So do not run after fake offers and schemes.

Systematic investment

There should be a discipline in our investment behavior. If we try to invest in one lot, it may not possible for most of us. Try to invest regularly. Systematic investment in various investment schemes is good and advisable. One can make regular investment in regular intervals of weekly, monthly, quarterly etc. Suppose for one time investment in Mutual funds you have to make a minimum investment of 5000 bucks. But in systematic investment plan you can start with a minimum investment of 250 bucks.  It will not make much burden and your money will grow with geometrical progression. It is not necessary to invest in Mutual funds, you can invest in banks recurring deposit schemes, Post office monthly deposit schemes or even in Public Provident Fund (PPF) also you can practice this Systematic Investment and can get the power of cumulative investment which accumulates your wealth without giving much burden.

Start investment early

This is one of the main factors you have to consider. Start investing as early as can be.  If you start at an early age you can make huge money when you need money in your life and at the time of retirement. If you invest 1000 bucks in regular monthly installments in PPF and you can attain 187747 bucks in ten years, 351893 in 15 years and 593076 in 20 years with an interest of 8% (which is applicable to PPF at present) while you depositing a Total investment of 120000, 180000, 240000 bucks respectively in regular monthly investments.

Investment amount                                                            Total Amount with interest

1000 x 12 x10 (10 Years)  = 120000                       -                      187747

1000 x 12x15 (15 Years)   = 180000                       -                       351893

1000 x 12 x 20 (20Years) = 240000                      -                        593076

Insure your life, wealth and health adequately

This is also you must consider when you wish to invest fruitfully. As you are an earning member of your family and if any unfortunate event occurred, you should take much protection for your dependents and if any unfortunate loss happened to your assets, be protected with adequate insurance. For life insurance better go for term insurance which gives you enough protection with a low premium. Take a health insurance policy also to protect you and your family form immediate financial outgo due to any diseases. Do not consider these insurance premiums as a loss.

So handle your hard earned money with care and with wisdom so that you can get help for it at the time of emergency and watch the growth of your money with satisfaction.

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