What is the action of investing money?

An investment involves putting capital to use today in order to increase its value over time. It requires putting capital to work, in the form of time, money, effort, etc., in hopes of greater profits in the future than what was originally put in by the investor.

Ways to invest money (long and short term)

  • Mutual funds
  • Investment schemes/plans
  • Assets
  • Foreign Exchange
  • Commodities
  • Real Estate
  • Fixed Deposits
  • Stock Market
  • Insurance Plans
  • RBI taxable bonds
  • Purchase of Gold

How do we invest money for the long term?

Growth Stocks

  • They promise high growth and impressive investment returns
  • One has to commit to these specific stocks for around a period of three to five years approximately.
  • Analyzing and reviewing the company of your choice is important.
  • Example of such companies – Amazon

Stock Funds

  • A stock fund would be beneficial in the sense that the investor would not have to make it a full-time job to follow it
  • It has a lot of opportunities for diversification if the correct choice is made
  • Stock funds can be purchased online through a broker.

Bond Funds

  • Bond Funds are very beneficial for those (investors) who want to invest a comparatively less amount of money than they would have while purchasing a single bond.
  • In the case of other bonds, they are up to an extent risky, but bond funds are relatively and by far the most stable option to invest in for long-term benefits.
  • Government-issued bond funds are considered the safest of the kind.

Dividend Stocks

  • These stocks provide as the name suggests – a dividend- in simpler terms, a regular amount of money payouts.
  • Dividend stocks are primarily popular with investors who have a stable/constant income.
  • However, even though dividend stocks are not always constant, they may fluctuate as well, when the stock market gets volatile and unpredictable for the investors.
  • A company paying a dividend is more often than not an established and mature company and is a safer option.

Value Stocks

  • As the stock market goes up, the value of certain stocks can increase minimally or drastically providing huge advantages and benefits to the investor who has contributed to that stock
  • Value stocks are most efficient when interest rates rise, and are probably a very attractive option now with rising inflation and interest rates in economies worldwide.
  • Value stocks have the potential to give more profits than non-value stocks to investors.
  • Can be purchased from online brokers engaged in stock trading.

Target – Date Funds

  • These funds are a great option, they become more conservative as one’s age progresses, to ensure that the investor’s portfolio is safer as they move towards retirement when they will require the money. These funds slowly and progressively shift one’s investments from rather aggressive stocks to conservative bonds as the investor’s target date comes closer.
  • In essence, target-date funds are a combination of both stock funds and bond funds.
  • However, they are not as volatile.

How do we invest money for the short term?

Savings Accounts

  • Provides great mobility, this is to say that a savings account permits the holder to retrieve the money at any time that they wish to.
  • Greatly beneficial for those who require continued access to their funds.

Liquid Funds

  • Liquid funds are a category of mutual funds which permit investing money in short-term securities.
  • Not a viable option for emergency funds as retrieving one’s funds completely takes around two to three days approximately.

Recurring Deposits

  • Allows regular deposits and returns on those respective investments with shorter intervals in between.
  • A recurring deposit account is very flexible and more accessible.
  • There is flexibility in investment amount, it can start from as low as Rs. 1000 to as high as ten lakhs.

National Savings Certificate

  • Freely available to all Indian citizens.
  • It serves as a fixed-income investment scheme that one can set up in any post office branch.
  • It is primarily a scheme that deals with a savings bond that serves small to mid-income investors in India.

Which is better?

Long-term or short-term saving

Short-term investments on a consensus have a lower risk factor to the investors as compared to long-term investors. Though both types of investment are useful, it entirely depends on your investment appetite which type of investment fits you better.