An investment can be defined as an asset that is created with the intention of helping your wealth to grow with time and secure your future financial requirements. The wealth created through investment plans can be used for a variety of objectives such as meeting shortages in income, saving up for retirement, or fulfilling certain specific obligations such as repayment of loans, funding children’s higher education, purchase of other assets, etc. Read on to get a clearer idea about what an investment is so that you can choose investment options that suit your unique requirements....Read More
: In Unit Linked Policies, the investment Risk in the investment portfolio is borne by the policyholder.
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An investment is essentially an asset that is created with the intention of allowing money to grow. The wealth created can be used for a variety of objectives such as meeting shortages in income, saving up for retirement, or fulfilling certain specific obligations such as repayment of loans, payment of tuition fees, or purchase of other assets.
Understanding the investment definition is crucial as sometimes, it can be difficult to choose the right instruments to fulfill your financial goals. Knowing the investment meaning in your particular financial situation will allow you to make the right choices.
Investment may generate income for you in two ways. One, if you invest in a saleable asset, you may earn income by way of profit. Second, if Investment is made in a return generating plan, then you will earn an income via accumulation of gains. In this sense, ‘what is investment’ can be understood by saying that investments are all about putting your savings into assets or objects that become worth more than their initial worth or those that will help produce an income with time.
Financially speaking, an investment definition is an asset that is obtained with the intention of allowing it to appreciate in value over time. Generally, investments fall in any one of three basic categories, as explained below.
The question ‘what is investment’ is mostly followed by understanding your investment objectives and identifying where to invest. Keeping aside investments in real estate and assets like jewellery and all, when it comes to different instruments, another aspect of understanding ‘what is investment meaning’ is to know about different types of investments. The first refers to equity investments, and the second category includes debt instruments. If your investment objectives match, equity investments can offer greater returns and carry relatively higher risk. While debt instruments are less risky, but offer relatively low returns.
Further, what is investment meaning can also be understood from the perspective of how they are acquired.
Following are different types of investments in India:
Mutual funds are a type of investment where money from multiple investors are pooled and invested by professional fund manager. Depending on your risk tolerance, investment tenure and returns expectations, you can choose to invest in Equity Mutual Funds, Debt Mutual Funds or Hybrid Mutual Funds. You can also make tax saving investments through mutual funds. Investments made into ELSS (equity-linked savings scheme) mutual funds are eligible for tax benefits under Section 80 C.
ULIPs or Unit Linked Insurance Plans are a type of investment that provides both investment and life insurance benefits. A portion of the money invested into ULIPs is allocated for investment, meaning in this plan a part of your premium is invested in different funds and helps you earn market linked returns. It also offers tax-saving benefits of up to Rs. 1.5 lakhs under Section 80C.
Public Provident Fund (PPF) is considered as one of the best investment options for long-term investors who are seeking guaranteed returns. Current PPF interest rate is 7.1% p.a. till September 2022 and being a government-backed scheme, it features minimal risk to the principal amount invested.
For your benefit, you may also find out what is investment for tax saving and invest in such plans. Also, as discussed earlier, when you ponder over what is investment meaning and similar questions, consider adding term plans and health insurance policies in your portfolio for securing your family.
After this, put your funds in instruments like ULIP, mutual funds, ELSS (Equity linked savings scheme) and other government plans.
When talking about equity investments, you may wonder what is equity share?
Here’s what you need to know to understand what is equity share:
Any corporation can use equity shares as a long-term financing source. These are non-redeemable shares that are issued to the general public. Shareholders have the right to vote, share profits, and claim a company's assets. Understanding what is equity share can help you make more informed decisions and create a diverse investment portfolio.
Now that you know ‘what is investment definition,’ and how it can help you create wealth, the next thing is to understand how to invest. Here are a few vital points you must keep in mind before you decide to invest.
Build a diversified financial portfolio according to your investment objectives by putting your funds in different instruments for maintaining the right balance between risk and returns.
Also, when thinking about ‘what is investment meaning’ and ‘where to invest,’ consider giving priority to those instruments that offer security to your loved ones. It may include life insurance policies like term plan, ULIP (ULIP full form: Unit Linked Insurance Plan) and other such instruments. You may consider the objectives for investment to generate appropriate returns from it.
You can invest your savings in some of the investment options in India, to create a corpus that will serve as a source of income post-retirement.
Since funds are influenced by market forces, it is imperative that you closely monitor them periodically. You may also consider readjustment if your portfolio is not generating good returns.
Depending on your investment and savings objectives, you can choose from a variety of investment plans offered by Max Life including Guaranteed Income Plan, Smart Wealth Plan, Savings Advantage Plan and more.
Before you decide to invest your earnings in any one of the many investment plans available in India, it’s essential to understand the reasons behind it and the investment meaning. While the individual objectives of investment may vary from one investor to another, the overall goals of investing money may be any one of the following reasons.
Reasons to Start Investing Today
The question, ‘What is investment meaning?’ becomes crucial when asked about savings. Savings simply mean putting aside a part of your earnings over time. The saved amount of money is subject to no risk and, therefore, does not help you earn any profits or returns. However, its value appreciation remains more or less stagnant, as there is no addition over and above what you add each month.
On the other hand, investment definition is based on the concept of earning returns or profit on the money you first put in a fund or spent on an asset purchase. Remember here that the involvement of risk is what makes them profitable.
When understanding ‘what is investment meaning,’ remember that there is a direct relation between returns and risk, meaning more significant the risk involved, higher are the chances of earning greater returns. That is why when you are identifying ‘what is investment meaning?’ for you, you must check the risk profile of different options and review your risk appetite.
Some people waste many years of their life thinking over ‘what is investment’ and figuring out the investment objectives and how it is beneficial. They hesitate to consider investment meaning for wealth creation because of the involvement of risk. However, many investments are also risk-free, and some carry only little to moderate risk.
When you are young, it is best to fully understand about ‘what is investment meaning’ and its role and then start. At an early age, you have few responsibilities and, thus, have a better tendency to experiment with different investment and leverage those, which suit your requirements best.
Investing early is also better because of the compounding benefits on investments that help grow your money. With more years ahead, you can reap maximum benefits on your investments, provided you first understand and evaluate different aspects of ‘what is investment meaning’ and then start early.
You may be wondering why to give so much importance to the question ‘what is investment meaning,’ when you can work towards saving more from your earnings instead. Taking a portion of your income and saving each month will only create a reserve fund, which may prove to be inadequate in covering your family against a medical emergency.
On the other hand, now that you know ‘what is investment,’ you will understand that investing your money leads to wealth generation and helps in achieving life goals.
Now that you know what is investment definition and role, and about a few plans, and its benefits start early for maximum benefits. Choose the right plans and track your portfolio for ensuring high returns. So, find out what is investment meaning for yourself by putting your money in different options and see them grow.
Investment in market linked investment plans are subject to market risk. We suggest to consult your financial advisor before investing.
Investment definition is an asset acquired or invested in to build wealth and save money from the hard earned income or appreciation. Investment meaning is primarily to obtain an additional source of income or gain profit from the investment over a specific period of time.
Following are some of the different types of investments available in India:
Investment is done keeping a financial goal in mind. The investment objectives help generate income and grow over a certain period of time. Investment includes bonds, stocks, PPF amongst others, which helps in growing money and providing an additional source of income.
As investment helps us in growing our money over a certain period of time, there is a certain risk accompanying the investment. You might get better returns in some of the investment options, but they might also come with higher risk in comparison to other investment options providing moderate returns.
You need to consider some essential points before you start identifying investment objectives and opportunities. Following are 4 key points to know more about how to begin with investments in India:
Following are some of the primary objectives of investment:
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