Saving and investment is the fundamental element for financial management.
In other words savings are the available cash that left out from your income after subtracting all your expenses like food,Basic amenities, education, health etc.
So You earn interest on your savings.
While investment is the right utilization of your savings that give you higher return in future.
Therefore Investment is done on asset purchasing on its attractive value in hope for to generate income from that or getting appreciating value for future selling.
So now consider this you are saving your life long hard Earned money further for your retirement benefits.
However in a saving account or in cash form or other options.
Meanwhile your money gets depreciated along the course of time and the ultimate amount of corpse you get is not sufficient enough for you to sustain.
Moreover you never understand the money management concept.
Hence you should learn more about wealth creation
If you never make money from your money while your everyone investing it’s hard for you to sustain in this world.
So better is don’t just save, invest this money to get higher benefits.
What’s in it for you?
- Different Stages of Saving and Investment
- Savings Vs Investment
- Regular Investment and Lump sum Investment
- Disciplined Investment strategy
- Things to consider while investing
- Investment in India
- Bank vs. Mutual Funds vs. Gold vs. real estate vs. stock market
Different Stages Of Saving And Investment:
However it’s obvious the amount you save & invest is directly depend upon your earnings.
The more you earn the more you can save and further invest.
Firstly The key element is Patience; look nobody became billionaire overnight so you have to be patient enough to grow your money.
Lastly the more early you start practicing these more amount you can accumulate and in the Early stages live below your means instead of luxury lifestyle.
The following cases are seen in the nature of people earning and spending:
High earning high expenditure:
These people are irresponsible in money management but they always want a luxurious life.
However In this practice the money never sustain longer and at the time of retirement they realized they have very limited amount of wealth left.
Expenditure More But Earning Less:
This category people are the best in case of money management they know how to make money out of money.
Therefore they live below their mean and plan their finance in result they successfully create a healthy amount of wealth at the time of their retirement.
Low earning high expenditure:
This category is very dangerous, these people spend more than their income in result they sink in the trap of indebtedness.
But this lead to a very below standard of living in the society so the sustainability is very low.
Low Earning low Expenditure:
This category people have a very limited amount of income that you have nothing left to spend after all money being used on their basic amenities like education, food, health etc.
Savings Vs Investment:
|Basics for comparison||Savings||Investment|
|Meaning||Putting aside some portion of your income certainly as emergency fund.||Making money from your money to beat the inflation.|
|Purpose||Savings is done for short term goals and emergency fund.||Investing is done to get better returns and capital formation.|
|Risks||Least or negligible||Low risk carry low returns and high risk carry high returns.|
|Instruments||Savings and current accounts, provident funds etc.||Gold, real estate, Mutual funds, Stocks etc.|
|Liquidity||In short Low liquidity||High liquidity but depends on your portfolio|
|Returns||Certainly Zero returns||High risk most of the time|
The individual who don’t have a sufficient amount of capital during his career, he can go for regular investment.
As he can take advantage of the market volatility during the course of time.
So this is less risky and the person has to modify his investment strategy according to the market condition.
Lump sum Investment:
Meanwhile the person who has a massive amount of wealth can opt for lump sum investment.
The vision is to long term gain but the market conditions can hamper the investment as the money gets stuck in the market.
But the accumulation is also massive as the amount is massive.
The person doesn’t have to modify his strategies he can relax once investing the money.
However this also included a fear of lock of all capital in one policy.
AS Albert Einstein said,
“Compound interest is the eighth wonder of the world. He, who understands it, earns it; who doesn’t, pay it.”
Disciplined investment strategy:
Meanwhile the perseverance and dedication in saving and investment to achieve financial freedom is said to be a disciplined investment strategy.
However the say goes,
“Building wealth is a marathon, not a sprint. Discipline is the key ingredient”
Consistency is something most people lacks so while everyone is saving you invest and when everyone is investing you religiously invest means never back out from the market.
So you should invest more often; in other words as everyone says not taking risk is the greatest risk.
Effective Investment required continuous upgradation of your knowledge about capital market and financial market. So rather avoid procastinating and do your homework the market condition with being consistent.
Firstly saving and investment demand patience from an individual. Always invest in order to get benefited in the long term.
Therefore short term benefits never really help you to achieve your goals. So trust the process analyze market situation and be calm and compose while investing.
Meanwhile you should always prepare for the worst case scenario.
When the market is falling everyone will panic and back out.
Moreover this can give you better opportunities to add affordable instruments in your portfolio.
Hence saving and investment is a must in favorable market situations..
So if your mind is flexible you can foreseen the situation and react accordingly.
Things to consider while Investing:
- Select your short term and long term goals
- Evaluate your investing capacity
- Risk management likewise Return calculation
- Keep aside an emergency fund
- Tax deduction but focused investment
Hence you should learn more about Tax planning and deduction
Investment in India:
As you decided your investment strategy meanwhile you can consider different investment options in India.
These further divided on the basis of different aspects like return, safety, volatility, liquidity etc.
How investment in mutual fund and other instrument is done, you can select these instruments according to your comfort not only on the advise of market expert but also on your market understanding.
Banks Vs Mutual Funds Vs Gold Vs Real Estate Vs Stock Market
|Bases of Comparison||Bank||Mutual Funds||Gold||Real Estate||Stock market|
|Beating Inflation||Impossible||Most of the times beat inflation||In long term it’s a good choice||Beats with greater margin in long term||Beats inflation short term as well as long term|
|Diversification of portfolio||Impossible||Possible||Impossible||Impossible||Possible|
|Taxation||High tax rates||Moderate tax rates||High tax rates||High tax rates||Moderate tax rates|
|Hidden Charges||No hidden charges||No hidden charges||However there are multiple charges||Similarly Many charges involved||Brokerage charges|
|Reliability||Fixed Return||However Relies on fund manager skills||Depends on market demand||Depends on market demand||However Relies on own skill|
|Time||Once create no further requirements||Time consuming while choosing right funds||Once purchased no further requirements||Time consuming while picking right estates||Time consuming while building strong portfolio|
In conclusion it’s really depend upon your vision towards your financial goals.
But be consistent and keep patience, moreover understand market condition and the nature of people at large.
Moreover these elements can make you a successful investor in the long term.
However your emotions are your greatest enemy don’t get addicted to the investment or else it cans really a worst nightmare for you.
Build your portfolio according to your risk appetite but not seeing other investing and always have a backup emergency fund if any financial crisis came upon it’ll help you to survive in vital situations.
Investment can be benefited most if you strategize your portfolio better or else it can also be negative.
Yes providing a good investment plan.
Yes Except the bank stock they are working with.
Yes some investment instruments are comes under tax deduction like insurance policy and Provident funds etc.
Yes there are some tools that can help you with this.
Equity funds, gold and real estate’s give maximum returns providing well planned investment.
Investment is necessary to grow your wealth.
It gives you other source of income so it can consider as an asset.
Investment increase, grow your wealth with a compounding effect.
Investment where the return is under the amount provisioned by govt. Is tax free.