Everybody wants to possess
money and in fact people are willing to have money in abundance without any
upper limits. However, when it comes to
managing money acquired, rarely some people are found to be successful while
many fail to protect their hard earned money.
Keeping idle money is a
difficult job rather than the struggles put forth for acquiring such money;
however, such idle money can be profitably deployed as profitable investments and definitely any
prudent investor takes sufficient time to take appropriate decisions in regard
to selection of suitable schemes for the purpose of investments.
Money can be invested as
detailed below:
01.
Bank
deposits: Keeping the money in deposits with banks is considered
to be the safest venture for every individual. On the one hand the money in
banks is found to be safe and secure and on the other hand, the investor at any
point of time can get back his money from the bank at his will. There are
different kinds of bank deposits namely; savings bank, current account and term
deposits. However, the interest available through bank deposits may not be much
compared to investments made in any other schemes.
02.
People can invest in mutual funds which are
found to offer better returns compared to investments made in banks. However,
mutual funds are found to be highly risky and there is no guarantee that the
money invested can be redeemed in full without any loss.
03.
Some people are interested in investing in
gold and at present on account of the increase in the prices of gold, people
started more in number towards either purchasing gold available in the form of
gold biscuits, coins or jewelry or investing in gold bonds which are found to
offer higher returns.
04.
When the person is found to have bulk
money, he can very well invest the amount in buying plots, lands or houses
which are found to yield good long term returns.
However, it is the
responsibility of the investor to study the various investment schemes in
detail before finalizing his investment decisions.
The investors should have
some basic knowledge about the term called as inflation. A simple study can be
conducted by linking inflation with returns available from the abovementioned
investment schemes.
The effect of inflation
can be understood through the following examples:
01.
An investor is having an amount of $1000 as
on date. Using $1000 he has the option to buy a product. In case he purchases
the same product after one year, the price may be around $1100 and in this case
the inflation works out to $100.
02.
Instead the person wants to invest the
amount in bank deposit and he is able to get interest at 6%(approximately) for
one year and the effective return will be $60 and in such a case he loses $40
(the difference between inflation and effective interest)
03.
Let us imagine that the investor gets a
return of $80 by investing the amount alternatively in one mutual fund scheme
and in this connection he loses by $20
04.
Alternatively when he decides to purchase
gold and the market price of gold after one year is found to be $1110 and in
such case he earns a profit of $10
While comparing the
different types of investments as mentioned above namely; deposit with bank,
investment in a mutual fund scheme and gold, investment in gold is found to offer reasonably a good
return.
However, the examples
quoted above are only for the purpose of understanding the intricacies involved
in investing the amount in suitable schemes.
An intelligent investor
invests the amount in diversified schemes and he decides to invest 30 percent
in bank deposits; 30 percent in mutual fund schemes and the remaining 40
percent in gold etc. so that he is not much affected by inflation factor.
As such, it is very well
understood that the investors should understand the different investment avenues in
detail and in case of any difficulty they can discuss the issues with a financial
consultant who can offer better solutions when it comes to investment in
various financial portfolios.
No comments:
Post a Comment