Tuesday, June 5, 2012

Where do you want to invest your hard earned money?


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.

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