Start your Investing Journey! - Invest for Your Future
Grow your savings! Achieve your financial goals with tax benefits by finding the best investment scheme at Fincover®
What is an Investing?
Investing refers to allocating money or resources to generate income or profit over time. Investors typically purchase financial assets, such as stocks, bonds, real estate, or mutual funds, to achieve capital appreciation, receive dividends, or earning interest.
Investing involves assessing potential risks, conducting research, and considering factors such as the investment’s time horizon and the investor’s financial objectives. Successful investing often requires a well-thought-out strategy, diversification, and a long-term perspective.
Savings vs Investments
| Feature | Savings | Investments |
|---|---|---|
| Goal | Short-term (emergency funds, upcoming purchases) | Long-term (retirement, wealth growth, future goals) |
| Risk | Low | High (potentially) |
| Returns | Low (typically below inflation) | High (potentially, outpaces inflation) |
| Liquidity | High (easy access) | Low (may have lock-in periods or early withdrawal penalties) |
| Typical Examples | Savings accounts, CDs, money market accounts | Stocks, bonds, mutual funds, ETFs, real estate |
| Average Annual Return | 0.5% – 1.5% | 7% – 10% (historically, varies) |
| Minimum Investment | Varies by account (often low) | Varies by asset (can be low for ETFs, higher for others) |
| Government Insurance | Yes, up to specific limits | No |
| Suitable For | Risk-averse individuals, short-term needs, quick access | Risk-tolerant individuals, long-term goals, wealth building |
Types of Investment Plans
| Investment Type | Returns | Description |
|---|---|---|
| Equity Stocks | High (but volatile) | Investing in shares of companies can yield substantial returns, but the stock market involves risks due to price fluctuations. |
| Mutual Funds | Varying (based on fund type) | Mutual funds pool money from multiple investors to invest in diversified portfolios of stocks, bonds, or other securities. |
| Fixed Deposits (FDs) | Moderate | FDs offer fixed interest for a set period, providing stability but lower returns compared to equities. |
| Public Provident Fund (PPF) | Moderate | A government-backed savings scheme offering fixed interest, tax benefits, and a long-term horizon. |
| Real Estate | Moderate to High | Investment in property can yield rental income and capital appreciation over time. |
| Government Bonds | Low to Moderate | Low-risk fixed-income securities issued by the government offering steady returns. |
| National Pension System (NPS) | Varying (market-linked) | A long-term retirement investment with a mix of equity, bonds, and other assets. |
| Gold | Moderate | Gold investments offer a hedge against inflation and serve as a safe-haven asset. |
Why Start Investing Early?: Examples
Start investing early to leverage the power of compounding and maximize your wealth over time. Early investments allow your money to grow exponentially, providing long-term financial security.
With examples, discover how starting early ensures the achievement of financial goals, risk mitigation, and the building of a substantial retirement corpus. Learn why time is a valuable asset in the world of investments, allowing you to capitalize on market fluctuations and create a robust financial foundation for the future.
Power of Compounding
Example: Consider investing INR 10,000 annually from age 25 to 35, earning an average annual return of 8%. By age 60, the investment could grow to around INR 3,28,515. Starting at age 35 with the same annual contribution and return rate, the final amount would be around INR 1,45,560. The extra ten years of compounding significantly increases the wealth.
Risk Mitigation
Example: An investor starts with INR 1,00,000 at age 25 and experiences a market downturn, resulting in a 20% loss. However, with a long-term horizon, the investment has time to recover. If the same downturn occurs at age 45, the recovery window is much narrower.
Long-Term Growth Potential
Example: Investing INR 5,000 monthly from age 25 to 60, with an average annual return of 12%, could result in a corpus of approximately INR 6,29,71,946. If the investment is delayed until age 35, the final amount may be around INR 1,91,91,489. Starting early allows for more time for investments to grow.
Retirement Corpus
Example: Saving for retirement by investing INR 15,000 monthly from age 25 to 60, with a 7% annual return, could accumulate around INR 5,57,16,631. If the investment is postponed until age 35, the final amount might be approximately INR 2,33,36,933. Starting early ensures a more substantial retirement corpus
Investment and risk
What is Investment Risk?
Investment risk refers to the uncertainty associated with the potential return of an investment. The higher the potential return, the higher the risk involved. There are different types of investment risks, including:
Market risk: The possibility of the entire market declining due to economic factors or other events.
Asset-specific risk: The risk associated with a particular investment, such as a company going bankrupt or a property losing value.
Interest rate risk: The risk that rising interest rates will reduce the value of your fixed-income investments.
Inflation risk: The risk that inflation will erode the purchasing power of your investment returns.
