Investment can be understood as follows:
- Putting your spare money into an income generating asset or an asset which would appreciate in value with time is an investment.
- An activity or act where ‘money makes money that in turn makes more money.
Now if you invest then you will:
- See your savings grow
- Be motivated to move to the next level
- Realize that wealth is when small efforts produce big results & poverty is when big efforts produce small results
- The value of your money continues to increase over time.
Investment decisions should be made on basic criteria:
Safety: while investing you must ensure your investment is safe.
Liquidity: Whether it will be possible to get it back when you want or if you want money back in 10 years. You must be able to get it back whenever you want to.
Returns: Many times all these criteria contradict with each other-e.g. Long term investments might have higher rate of return, but they are not liquid or the investments where there are higher returns are not safe. While investing we have to look into all three aspects and balance them.
- Don’t invest all your money in one investment. Diversify investments.
- Earlier you start, better it is
- Higher the rate better it is, a small difference in the rate makes a big difference
Save 10% of everything you earn from an early age and you will end up with a comfortable sum.Invest 10 % and you could end up rich.