We all are thinking ways of making money. We work long hard hours and sweat till our energy saps and we have absolutely nothing to give anymore. This is all well and good but what about the money that you are earning. Will it not be great if that works as hard as you do and makes more money in itself? This is where the art of investment comes in.
• What is investment?
Investments are special instruments and tools that are designed to give you returns for your investments from time to time. Suppose you earn Rs 100 and invest Rs 10 from it. Given a length of time say, one year you want to expect that Rs 10 gives you a return.
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There are various ways to invest money. Some of the ways are tricky, some are fairly simple. Some ways gives you more returns some gives you less. The return is equated with another concept called risk. The more risk you take the more return you expect to make.
• What is risk?
Risk is the factor by which the probability of your return. Suppose you give your best friend a book to read. The probability that he will return it is nearly a hundred percent. This means that the risk attached to such an activity is very less. Therefore, if this was an investment that you were making, the returns would not be that great.
Now, let us take another example. Suppose that you have given the same book to a complete stranger. The probability that you will get it back is very less. This means that the risk associated with it is of a large proportion. If it was an investment you would have gotten, if at all, a very high return.
• What are the various instruments of investments?
Actually, there are countless ways to invest. Suppose you get yourself a college degree. It is also an investment that you make, which will give you returns. The more common forms of investments are financial, real estate and commodity based investments.
Among the basic financial investments are the fixed deposits, the mutual funds and the stocks and bonds of companies. Fixed deposits are the least risky; therefore it will give you the lowest amount of money in return. You just have to open an account and be done with it. Stocks are more risky, this means that they provide way more reward, as well. You need to check and open the cheapest brokerage account and then keep on adding to your stocks.
The other forms of investments are real estate where you buy a property and make your money grow along with the value of the property. In commodity, we mostly invest in gold and silver. Being less risky, their prices also remain steady over the course of many years.
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