There are two things that are considered as the pillars of the financial industry—savings and investments. While there’s a lot of similarity between the two in terms of execution, they actually are very different. Read on to know more.
Investment is something that you make today in the hope of reaping financial benefits tomorrow. It includes buying assets today to create wealth for the future. The expected profit can be in the form of interest earning or capital appreciation, or dividend.
- Many people might think that putting money in saving accounts also offer interests, so they can be tagged under investments. This however, does not always work.
Savings and investments differ in the way the money is utilised initially. Saving is more of a passive way of accumulating wealth, while investments are an aggressive way to increase your available funds. You don’t open a saving account to invest. It’s an account where you can stash away your money and use it whenever you want. However, with the low interests offered by savings account, most people don’t look forward to depositing their money in savings accounts.
Investment works differently. Here’s everything that you need to know about them:
Types of Investments
There are two broad categories of investments in the financial market: traditional investments and alternative investments. Most of the investments that are known to us, come under traditional investments. They include real estates, shares, and bonds. Let’s look at them in detail:
Traditional Investments
Most of the investments that are known to us, come under traditional investments. They include real estates, shares, and bonds. Let’s look at them in detail:
Stocks
Stocks are nothing but equities and shares issued by companies to raise funds. Stocks are one of the most popular forms of investment in the world as the returns from stocks are usually high. The risk associated with company stocks is also high.
Companies issue share certificates that you can buy and eventually sell.
Mutual Funds
Mutual Funds are professionally managed financial instruments that invest money on behalf investors in different securities. Mutual funds are of different types like open-ended funds, stock funds, and balanced funds. The classification depends on their allocation percent in different securities. So, an equity fund is one that invests only in equity and is associated with a lot of risk and a debt fund is one that invests in money market and debt instruments and comes with a low risk.
Fixed Deposits
FDs (Fixed Deposits) are considered as one of the safest methods of investing. A fixed amount of money is kept safely in a financial institution, mostly a bank or NBFC. Interest is earned for the amount your money is kept fixed. You can withdraw the money at the time of maturity.
Fixed Deposits are of two types i.e. Cumulative FD schemes and non-cumulative FD schemes. The difference between the two is the way in which you receive the interest. For cumulative FDs, the interest is accumulated over the tenor and paid at the time of maturity.
On the other hand, in the case of non-cumulative FD schemes, you invest a sum for a specified tenor and receive the interest periodically. You get to choose the payout and that can be monthly, quarterly, half-yearly, or yearly. The choice between the two depends on your financial goals.
Many banks and NBFCs offer FD schemes for you to invest in. The rate of interest, convenience of application, liquidity, and the payout nature are some of the factors that you need to keep in mind while investing in an FD.
Bajaj Finance FDs are one of the best options you have and here some of the reasons why:
• Bajaj Finance FDs offer a secure and stable growth for your savings
• The interest rate offered is up to 7.85% which is one of the highest in the Indian financial market
• The
FD Rate for Senior Citizens is higher than this and with added benefits for renewal
• You can avail a loan against your FD offering liquidity and ensuring you have money during emergencies
• You can choose from cumulative or non-cumulative interest payout, based on your requirements
• Flexible tenors let you choose your investment tenor as well
• You can start with an amount as low Rs. 25,000 without affecting your budget
These are only some of the reason why Bajaj Finance FDs are great investment tools.
Real Estates
Real estate is type of investment that involves the buying, selling, and leasing of land or property. Cities like Bangalore, Mumbai, and Delhi are hotspots for investors as the real estate prices are high in these places and so is the demand. Investors take Home Loans from banks and NBFCs to buy apartments and lease them out or sell them when prices increase.
Bonds
Bonds are issued by private and public-sector enterprises to raise a huge sum of money, a sum that a bank is incapable of lending. The borrowing entity issues these bonds in the public market and investors can buy them and earn interest by selling them in the future. This rate is usually prefixed for a specific period.
Alternate Investments
Alternate investments are made in order to acquire precious metals, objects, and jewels with the expectation of getting high returns in the future. Some of the prominent alternate investments include: Hedge Funds, Venture Capital, Private Equity and collectible items.
The Importance of Investing:
Investment should be made integral part of everyone’s financial planning. This will ensure that your hard-earned money isn’t lying around unproductive. Here are some of the reasons why you should invest:
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Grow your money: Investing your money ensures that it is growing instead of just lying there in your savings account.
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Emergencies: The returns from investments can be used in the case of emergencies, like sudden medical expenditures etc.
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Earn income: It is one of the best ways to earn income for your accumulated wealth.
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Tax reduction: You can reduce your tax by investing your money in the right avenues.
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Set your goals: Intelligent investments can help you plan out your long-term as well as short-term financial goals effectively.
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Secure yourself: You can fight inflation by investing in the right instruments and allowing your money to grow.
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Security: Investing your money ensures the financial security of your loved ones.
How to Invest?
This is one of the most basic questions that people ask along with where to invest. The answer to both these questions depends on your earning and spending. After analyzing your funds, you need to find out what your financial goals are.
There are different investment avenues to invest in and now you can invest online from the comfort of your home. Research a bit to find out what are the best available options for you and start investing. All the best!
