Why Is Investing Important And Where Should One Invest
Gone are the days that people relied solely on their savings to ensure their financial security in the future. Savings might not be enough to provide financial security in today’s environment.
It’s also possible that money sitting in your savings account or locker isn’t serving the goal. This is due to two factors: first, the idle money in your savings account is the opportunity cost because it cannot make more money, & second, it lacks the ability to beat inflation.
It is evident from the preceding truth that simply producing money & keeping it idle is insufficient. It would be beneficial if you put your money to work for you. What’s the best way to go about it? INVESTING is a good way to start.
Investing is the process of allocating funds to various asset classes with the goal of capital appreciation & higher long-term returns.
Why Should You Put Money Into It?
Investing gives financial security in the present and the future. It helps you to enhance your wealth while simultaneously outperforming inflation. Compounding is also advantageous to you.
Furthermore, investment have the ability to help you achieve your financial objectives, such as acquiring a home, developing a retirement fund, and establishing an emergency fund, to name a few.
Investing instils financial discipline by establishing a habit of setting away a specific amount each month or year for your investments.
Some investment vehicles, including as the Equity Linked Saving Scheme ELSS, Public Provident Fund PPF, National Pension System NPS, and others, can help you reduce your tax burden.
Popular Investing Alternatives
You have a number of investment possibilities available to you. You must choose based upon their financial objectives, risk tolerance, and time horizon. The following are some of the most popular investing options:
Direct Investment
A stock investment is how it’s generally referred to. Among investors, it is among the most popular investment possibilities. When you buy stock in a corporation, you are essentially buying a piece of the company. Long-term stock investments help with capital growth. Stock investments have a lot of potential for high profits, but they also have a lot of hazards.
Mutual Funds (MFs) Are A Type Of Investment
A mutual fund is the pool of money put together by a group of people who want to invest in the same thing. The money raised is invested in equities, bonds, & money markets, among other things. Because you could start & stop your investment anytime you like, mutual fund investment is regarded to be flexible. They offer moderate returns while providing a lower risk than stock investments.
PPF Stands For Public Provident Fund PPF
PPF is a government-sponsored savings plan that attempts to mobilize small contributions and give individuals with a secure post-retirement life. It is long-term saving plan with a 15-year lock-in period. PPF investments are tax deductible under Section 80C of Income Tax Act of 1961, and they are also considered to be relatively safe.
Provident Fund For Employees (EPF)
EPF, like PPF, is the retirement-oriented investment scheme which is established exclusively for salaried employees. A certain percentage of the employee’s monthly wage is withheld under this arrangement, with the employer contributing an equivalent amount. A tax deduction is available for EPF contributions, and the ultimate amount received at maturity is likewise tax-free.
System Of National Pensions (NPS)
The National Pension System (NPS) is a government-sponsored retirement stipend plan that aims to develop a fund that can give people with a monthly pension after they retire. It has an obligatory lock-in term until retirement; however, after retirement, you could make partial withdrawals. Tax deductions are available for contributions to the NPS.
Fixed-Income Investments
For conservative investors, fixed deposits are an excellent investment alternative. They guarantee returns by offering a fixed rate of return for the particular period of investment.
When it comes to funds, index-based exchange-traded funds are the way to go (ETFs). Because they are linked to the underlying index, these funds only trade stocks while the index changes. As a result, they trade stocks far less frequently than actively managed mutual fund. This reduces your capital gains and, as a result, your capital gains taxes.
