Investing is something, which upon thorough analysis, safeguards the principal amount and ensures adequate return. Simply put, investing is a time bound process in which funds are allocated in assets or an asset class such as equity, bonds, real estate or commodities like gold or silver, In which you put your money to channelize your funds in order to generate income from the asset class or capital appreciation in the future.
Investment can be personal or for business purpose. For example, an asset is purchased to manufacture and that asset in return would generate income for the company. It basically was done to fetch you monetary returns.
People often miss the bus of investing in the best asset class at the best time. There are a lot of people who would confuse themselves considering savings as investments, but both are different terms altogether and have a different meaning.As quoted by Warren Buffet "Don’t save what is left after spending, but spend what is left after saving". The best example for this quote is if a person is earning Rs.50,000 and his expense is Rs. 15,000/-, he is left with a balance of Rs. 35,000/-. Now the balance which he is left with which is called “savings”. Until that Rs. 35,000/- is not utilised into some asset class which would deliver him any return, that is not called as an investment, but only savings. If that Rs. 35,000/- is invested in some asset class like stock or may be bond instrument or some mutual fund scheme which would give either dividend (in case of stock) or yield (in the case of bond) or some units in form of NAV (in case of Mutual Fund) which be called an Investment. Because that amount you would be investing in the asset class to I get you return which would be financial benefit, an investor would enjoy.
“Price is what you pay. Value is what you get”. This quote by Warren Buffet is very much in relation to the process of investment.
Now you all might be perplexed about the amount of time to be invested and the question of risk factor arises as well. There are so many Financial Institutions, Banks, Non Banking Finance Companies(NBFC) and also the Government who comes up with different kinds of financial products which might be in relation to Equity, Mutual Fund, Bonds, Derivative instruments, Alternate income products etc and each product is designed differently according to investor’s need. We will be explaining about the different asset classes in the next post.