Why Invest
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Why Invest
Keeping Money in savings account isn’t the smartest way of investing
Most of the investors think that keeping their extra savings in a savings account in a bank is the most prudent way of investments but that is not true. Smart investors should keep only that amount which is needed for emergency in the saving account and explore the other means of investments with their surplus cash such as Mutual Funds, Bonds or Stocks.
Why Investing is important?
Through Investing, we can put our money to work and build the security and wealth in the due course of time. Smart investing also helps you beat inflation and enhance the value of your original investments.
The wealth enhancement happens through the power of compounding and risk-return weighing
Compounding effect is observed when the returns received from the investment are not taken out but reinvested in the same scheme. These earnings then start contributing by having their own earnings. To maximise the power of compounding, an investor has to start investing as soon as possible and give instructions for automatic reinvesting of earnings.
The risk-return weighing
Every Investment carries a potential risk and return at varying level.
“An investment’s chance of producing a lower-than-expected return or even losing value is the Risk one carries while making an investment.
The amount of money an investor earns on the assets he has invested, or the investment’s overall increase in value is known as Return.”
Investments in stocks may provide a higher return than a fixed deposit but may carry a higher risk of losing value. An investor has to weigh the risk-return of every asset class he is investing into depending upon his risk appetite.