Investment is the need of life for everyone. By choosing the correct investment one can generate returns and can secure their future.
Lets understand the meaning of investment, types and benefits of it.
Table of Content
1. Meaning of investment
2. Nature of investment
3. Benefits
4 Advantages
5. Disadvantages
What is Investment
Investment means putting your money into an asset to make more returns from it in the near future. It refers to utilization of funds with the aim of profit in future . It means locking money is an asset which results in either regular income & capital gain.
Nature of Investment
1.RETURN
The return that you may receive will be in the form of yield and capital appreciation. The dividend or interest received from the it is your return.
2.RISK
It is inherent in any investment . In some cases risk is directly proportional to return.
3. SAFETY
Every investor expects they get their invested money back with the return they may have earned on maturity without any delay. When investors start investing they want safety of their money.
4. LIQUIDITY
Liquidity means converting your investment into cash.
Benefits
1 HIGH INTEREST RATES
They may also differ due to different benefit schemes offered by the institutions.
2. HIGH RATE OF INFLATION
Inflation has become a continuous problem . It affects rising prices. By investing you may be able to beat inflation.
3. INCREASING RATES OF TAXATION
When tax rate is increased ,it will focus on generating savings by taxpayers.
4. DIFFERENT CHANNELS
The growth and development of the country leading to greater economic prosperity has led to the introduction.
5. LONGER LIFE EXPECTANCY
Longer life expectancy is one reason for effective saving and further investment activity that helps for investment decisions.
6. LARGER INCOMES
More incomes and more avenues have led to the ability and willingness of working people to save.
Types of Investment
1. INDUCED
Induced investments depends on the profit expectations and is directly influenced by income level .
2. AUTONOMOUS
Autonomous investments is not affected by changes in the level of income and is not induced solely by profit motive.
-It is income inelastic, that it is not influenced by change in income.
-Autonomous investment are generally made by government on infrastructural activities
ADVANTAGES
1. Growth potential
Many investments have growth potential that means you can earn more by investing your money. By this process you may be able to reach your financial goals.
2. Diversification
Investing in a variety of risks so you can reduce the risk This is because if one asset loses value , your other assets may not be affected.
3. Tax Benefits
An incident of tax arises only upon the sales of units of a mutual fund scheme.
4. Liquidity
Many investments are liquid , which means that you can easily sell them if you need cash . This gives you flexibility and control over your money.
DISADVANTAGES
1. Illiquid Asset
One of the main disadvantages of investing in property is that it is an illiquid asset. This lake of liquidity means that it may be difficult if you need to access your money quickly.
2. High Entry costs
Investing in property can also be expensive , particularly when it comes to the initial entry costs.
3. Property Market Fluctuations
Another disadvantage of investing in property is the volatile property market .This volatility can make it difficult to predict the future value of your property investment .
4.Maintenance and Management
Owning a property also comes with maintenance and management responsibilities.
Conclusion
After reading this article now you must have understood the meaning of investment. So, investment is the need for everyone and you should start investing as soon as possible to enjoy the effects of compounding.