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Why You Should Consider Investing
There are two kinds of people in this world: those who work hard and those who make their money work hard for them. Keeping your life savings in your bank account is quite similar to keeping them under your old, dingy mattress. Your money will be safe, no doubt; but it won’t grow and you will be compelled to keep working hard (unnecessarily) for the rest of your life. Inflation keeps rising by the year and so do your expenses.
Working hard to maintain the same lifestyle is foolishness in today’s world. Regardless of how much you earn, it won’t be enough; it won’t be adequate to lead a comfortable life. Forget about travelling the world or retiring on a yacht. You will spend your whole life trying to make ends meet.
The above doesn’t paint a compelling picture, true. But your lifestyle can change drastically if you start investing, if you start making money work for you. Whatever it is you want to do in your life – be it sending your kids to college or to retire at the age of fifty – smart investment is the answer.
Here are some smart investment options to choose from.
Stocks
Investing in stocks (or company shares) is one of the smart investment options. When you buy a company’s shares, you buy a part of ownership in that company, which allows you to take part in the company’s growth. Companies offer shares, which are publicly listed on stock market exchanges. You can buy these and become an investor in the company. Stocks are better suited for long-term investments. Also, don’t equate stock market investing to stock market trading. The latter is a speculative activity and you should be careful.
Mutual Funds
Mutual funds have been around for the last few decades and they are gaining popularity by the year. Mutual funds companies pool the money from different investors and invest it in different markets to earn good returns. There are plenty of mutual funds to invest in and different mutual funds invest in different securities as per their research. Equity mutual funds, for example, invest mainly in stocks and equity-related markets; and debt mutual funds invest in papers and bonds. Hybrid mutual funds, on the other hand, invest in both equity and in debt. Mutual funds are a safe option. You can begin investing in mutual funds and exit from it as per your needs and convenience. There are plenty of tax-saving mutual funds as well that come under 80C.
Fixed Deposits
Fixed deposits are mainly suited if you want to invest your money for a pre-defined, specific time period. Their returns are small, but they are less risky as compared to investing in the stock market. They give you guaranteed returns and offer complete capital protection. If you want to play it safe and stay away from risks, then fixed deposits are ideal for you.
Fixed deposits are offered by banks for different time periods for different rates of interest. It’s important to note that interest rates are decided by the bank themselves and these investments are locked-in. Also, there is another variant of fixed deposits, which helps you save tax and comes with a lock-in period of 5 years.
Recurring Deposits
A recurring deposit (RD) is another safe, fixed-tenure investment option. It allows you to deposit a specific amount of money every month for a specific period of time. RDs are offered by post offices and banks. Again, the interest rates are decided by banks and post offices. RD is safe and risk-free. They offer guaranteed returns and capital protection.
Public Provident Fund
Public Provident Fund (PPF) is another smart investment option you can explore. It is a long-term tax-saving instrument, which comes with a lock-in period of 15 years. PPF helps you earn a tax break. The PPF rate is decided by the government of India every quarter. The money withdrawn at the end of 15 years is completely tax-free. PPFs also allow partial withdrawals if certain conditions are met.
Employee Provident Fund (EPF)
The Employee Provident Fund (EPF) is another prominent retirement-oriented investment instrument, which earns you a tax break under Section 80C. EPF deductions are usually a part of your monthly salary and the same amount is matched by your employer. Once it’s matured, the amount withdrawn from EPF is tax-free. EPF rates are decided by the Government of India every quarter.
National Pension System
The National Pension System (NPS) is also a tax-saving investment option and is quite new. When you invest in NPS, your money will be locked-in till your retirement and can earn higher returns as compared to EPF or PPF. One of the reasons for this is that NPS offers options to invest in equities as well. However, upon maturity, the amount is not entirely tax-free. A part of it has to be used to buy annuity, which will give you a regular pension.
Gold
Gold is the type of investment, which will protect you from inflation. Paper currency is issued by central banks and governments who are prone to bouts of printing money and overspending leading to inflation. Since gold is not under the control of governments, it acts as a hedge against fiscally irresponsible policies of governments / central banks.
The supply of gold can’t be increased overnight; it can only be increased with mining and exploration. They both need tremendous amounts of capital. This is what makes gold a rare asset.
In inflationary environments, or in bubble cycles, traders tend to invest into Gold to diversify and mitigate their exposure to other asset classes, especially “paper assets” like stocks, futures, bonds, etc.
These were some of the most prominent and conventional investment options. Now let’s take a look at another important investment option: cryptocurrencies.
Cryptocurrencies
Put simply, cryptocurrency is a virtual or a digital currency, which is designed to act as an exchange medium. It uses cryptography to verify and secure transactions and it also controls the creation of new components of a specific cryptocurrency. Cryptocurrencies operate independently of a central bank. Meaning, cryptocurrency is decentralized and doesn’t have a governing body.
There are various kinds of cryptocurrencies, but Bitcoin and Ethereum are by far the most popular cryptocurrencies. But there are a lot of other coins or tokens you can choose from. If you do your research well and understand how they operate, investing in cryptocurrencies can give you higher returns as compared to traditional investment options like stocks or mutual funds.
If you are going to invest in the stock market, the best way to go about it is to research the company you want to invest in: who’s on their boards, on their teams, know their future business plans, know how much profit (or loss) they made last year, etc. It is important and imperative to know all these facts before investing your hard-earned money into a particular company.
Investing in cryptocurrencies is no different. You should research the particular digital asset before investing your money in it.
To begin with, you have to open an account with a cryptocurrency exchange like Bitbns. These exchanges will allow you to exchange fiat currency into cryptocurrency. All you have to do is to deposit your money and you are all set to start investing.
One of the most important factors to know is that you don’t need to be above eighteen years of age to invest in cryptocurrency; there is no age limit for investing in cryptocurrency. However, you need to be above eighteen years of age if you want to invest in the stock market or in mutual funds. Investment journeys should begin at a young age and cryptocurrency exchanges recognise this and encourage everyone, irrespective of their age, to invest in cryptocurrencies.
Once you get started, you don’t need to go big on your first attempt. You can get lucky sometimes, but being lucky is not a strategy.
