Ways of Investing Money

What is investment? 

Investment is a systematic process. You should be clear with your financial goals before you start investing. Well laid financial goals take you a long way and help you to manage your investments more efficiently. 

Investments are not just limited to searching for the different securities and putting your money so that you earn a return. This is the job half done. It will no doubt make your money grow but in the long run the process requires a systematic approach.

To make your investment successful first lay down your financial goals. Once clear with your goals find out the risk that you can take. This is important because different securities earn you different returns and higher the return higher will be the risk. 

So, first find out the level of risk that you can take. There is one common way to do that; subtract your age from the age of your retirement. If you are of 30 years and the retirement age is 70 then your risk level is 40 percent. 

Once you have calculated your risk find out the part of your income that you can set aside to accomplish your financial goals and then plan a portfolio accordingly. A portfolio is a kitty which consists of different types of securities in different proportions. 

There are different securities in the financial market, some give you high return while other a fixed amount over the years. A portfolio helps you to diversify the risk associated with different types of securities. This happens because the loss from one security will be covered up by the gain from another security. 

You can invest in stocks, mutual funds, commodities, insurance, bonds, fixed deposits or recurring deposits and you can also keep your money in the saving account. Financial market has grown over the years and there are number of securities now available for you to choose from. 

Types of securities in which you can invest

Stocks

These come with high return and thus are considered risky securities. They require a careful analysis of the price trends and the growth of the sector to which the stock belongs. 

Mutual funds 

These are less risky than the stocks. The best part of mutual fund investment is that there are fund managers appointed by the mutual fund company who continuously monitor the investment and manage your funds according to market ups and downs. 

Insurance 

This type not only gives you the returns in the long run but also provide you with the life cover and ensures that your family is not deprived of the finances when you are not with them. 

Commodities 

These form an excellent inflation hedge. To trade in commodities you should have knowledge of the markets. 

Real estate 

These are an all time favorite. You increase your asset which increases in value with times. Investment in real estate helps you to hedge inflation. 

Government bonds and securities

These give you a fixed return over the years and are the one with the lowest risk.