Financial planning is one of the most under-spoken topics of the decade. Though the investment opportunity is vast but financial literacy is still left aloof. There are a number of options available but the options largely depend upon your risk appetite and your goal of an investment. Investment is never a get rich quick scheme that people are selling today. It is a way to grow your wealth consistently with the power of compounding and you must learn the basics first.
So here is a list of 6 investment options available today to grow your wealth.
What Is Investing?
First things first! Before deciding on an investment, you must first know what exactly investing is. Primarily, investing means either buying a stock/share of a company or buying a commodity with a motive of growing it with time.
Though investing is said to be a way to grow your wealth, you need not be a millionaire to start investing. You can start investing right after you get rid of any major liability like a high-interest debt. The power of compounding does wonders to even a small sum of money and can turn it into a fortune if you choose the right investment plan.
6 Investment Options Available Today
1. The Stock Market
But firstly, you got to get yourself out of any debt or liability as it can affect your risk appetite and lead to greater bizarre. As Warren Buffet suggests, rush things if you are a know-nothing investor. Know the market and let the market know you too. Investing in the Stock Market is one of the most common yet arguable modes of investment. It is the most profitable source for an investor to pledge his money.
Buying a stock is basically a tiny part of a company. If the company make sufficient profits, the investor is paid for is the share of investment. They are known as dividends. Your investment gradually turns profitable as the company grows over time. Meaning, as the company grows, your price per share also increases. Which later accounts for profitability when you sell your shares.
2. Investment Bonds
Bonds usually come with lock-in periods so it is recommended to not invest your emergency budget in any lock-in investment modes. Purchasing a bond is essentially lending your money to a company or the government. These companies or the government then pays you interest over the loaned amount, precisely for the bond’s lock-in period. Bonds are ideally much much less risky than the stock market but their return on investment is quite lower than the stocks too.
3. Mutual Funds
Mutual Funds is yet another famous mode of investment. A mutual fund is basically an investment in a particular company or a bank. In this case, the investment banker hired by the company invests your sum of investment in various stock profiles and bonds. With Mutual Funds, you can buy a basket of stocks that are typically chosen by a financial expert of the company.
But Here Is The Drill:
There are basically two ways to invest in a Mutual Fund, namely – Direct and Indirect. When you opt for an indirect mode of investment, you chose to opt for a broker and the broker can charge you a percentage bases fee on your investment. However, you can save this fee by opting for the Direct Mode.
In most cases, Mutual Funds may not match the profitability of the Stock Market but they are much less risky than investing in stocks. If you prefer a low-risk profile, Mutual Fund can be a wise call.
4. Fixed Deposits/Recurring Deposits
Fixed Deposits or Recurring Deposits are an ideal mode of investment for salaried individuals. FD & RD have a low-risk profile and are hence widely preferred by beginners. Fixed Deposits can be of any nominal amount just like RD. However, FD accounts for a one-time investment, unlike RD. Recurring Deposits, as the name suggests are recurring in nature. With an RD, you can invest a sum of money on a monthly basis and hence can be a preferred option for a salaried individual.
5. Savings Accounts
Here comes the least risky mode of investment and probably with the least return on investment too. Saving accounts can get a nominal interest on the deposited amount. It will a better option to invest when it comes to, well, not investing! The risk with a savings account is almost negligible but in most cases, low risk is equal to low returns.
However, saving account plays a very important role in saving and investing. It allows you to the stock risk-free sum of money that can be used in an emergency so you do not touch your investment otherwise.
6. Physical Commodities
Physical Commodities a.k.a physically owned investment. It can be precious ornaments like Diamonds, Gold or Silver. These commodities can save you from a sudden financial crunch for its liquidity.
You may be 20 or you maybe 40 but it is never too late or early to start investing. The right time to invest is now! Financial literacy is understanding the power of compounding, a month can often lead to a larger sum by the time you retire. All the best!