By Dolly Jamale
Investment-One of the most successful way to make financial provisions for the future, where most of the conditions are uncertain and unpredictable. With well planned investment one can get the satisfaction of safety and surety in life. We are familiar with investment from very early days of civilization. Initially the term saving was more popular, and was considered as safest way of making money stable. But with the advancements and development in various sectors scenario got changed. It brought more affecting factors in force. These forces are determining the stability of various investment avenues. In addition, individual interpretations and accordingly actions are also playing the major role in determining the market volatility. To control these fluctuations there are some regulatory bodies working. A Capital Market deals in financial assets, excluding coins and currency. The financial assets comprise of shares, debentures, bank accounts, pension funds, provident fund, mutual fund, insurance policy, and other securities. All investments are risky, whether in stock, capital market, banking, financial sector, real estate, bullion, gold etc. The degree of risk however varies on the basis of the features of the assets, investments instrument, the mode of investment, time frame or the issuer of the security etc. Investment benefits both economy and the society. It is an outgrowth of economic development and the maturation of modern capitalism. For the economy as a whole, aggregate investment sanctioned in the current period is a major factor in determining aggregate demand and, hence, the level of employment.
Investment may be said as keeping a sum of money aside from the present savings with the view of earning returns on it. It is done on the cost of sacrifice of present consumption of that part of money. The dictionary meaning of investment is to commit money in order to earn financial return or to make use of the money for future benefits or advantages. People commit money to investments with an expectation to increase their future wealth by investing money to spend in future years.
Elements of Investment
* Risk and Return
* To earn returns.
* To protect and increase capital.
Non Financial reasons
* To have money for important events.
* To Provide for Contingencies
* Tax Savings
* Ease of Withdrawal
Where one can invest?
* Fixed Deposits – They cover the fixed deposits of varied tenors offered by the commercial banks and other non-banking financial institutions. These are generally a low risk prepositions as the commercial banks are believed to return the amount due without default. By and large these FDs are the preferred choice of risk-averse Indian investors who rate safety of capital & ease of investment above all parameters. Largely, these investments earn a marginal rate of return of 6-8% per annum. * Government Bonds – The Central and State Governments raise money from the market through a variety of Small Saving Schemes like national saving certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds, etc. These schemes are risk free as the government does not default in payments. But the interest rates offered by them are in the range of7%-9%
* Money-back insurance - Insurance in India is mostly sold and bought as investment products. They are preferred because of their add-on benefits like financial life-cover, tax-savings and satisfactory returns. Even if one does not manage to save money and invest regularly in financial instruments, with insurance, the policyholder has no choice. If he does not pay his premiums on time,...