Investing

What is Investing?

Investing refers to deploying money into various securities or assets which may include Equities, Bonds, Debentures, Commodities and Real Estate in order to get a good return on the invested capital.

The return obtained by various asset classes might vary as each asset has different growth potentials. Therefore, as an investor it is very important to analyse the return on investment from each asset class and choose the one which offers a good real rate of return on the capital after factoring in Inflation and risk associated with the investment.

 What Investing is Not?

Investing is not Speculation. Speculation refers to betting on an uncertain outcome. Speculation can be equated to trading as it bets on the uncertain outcome that is sentiment of the market participants which vary in short term. Therefore, any trade made for short term usually is very risky. That might not hold good for investing as it involves analysis of the prevailing economic conditions and the business itself and choosing to put money in the best asset class that offers a high rate of return.

Why Invest?

Investing is very import as it helps an investor to increase the degree of his personal freedom and a sense of security and ability to afford the things one wants.

Due to the inflating economy, purchasing power of each rupee tends to reduce every year. Free cash held for long period can be ‘worth less’ and in coming years which can eventually make it ‘worthless’. Therefore, investing helps to ensure that the capital compounds over time and a high rate of return will help to beat the inflation and get a real return on investment