Two ways by which your money can work for you are:
- Money earns Money: You can give money to someone to use it for a pre-defined period of time. That money will come back with an interest. Or you can also invest in stocks.
- Buying something that could increase in value: You are an owner of something for which you hope that its value will increase with time. At the time of need, you can sell it and get the money along with the profit.
There are various short term and long term investments available in the market in 2014 like mutual funds, bank fixed deposits, equity shares, stocks and many more. One can opt for the most appropriate option as per his needs, budget and future plans.
Risk and Returns are the two terms that click in your mind instantly whenever you hear about Investment. All the three terms- Investment, Risk and Returns are interlinked and interdependent. High investment leads to more risk which further leads to higher returns.
Some people think that ‘Investing is Gambling’. But these two terms are quite different. One should not get confused with both. Gambling is putting money at risk by betting on an outcome which is uncertain. It works just on a hope that you might win the money. But investing doesn’t work on this principle. Yes there is risk but there is also a security of getting a certain amount of money after a defined time interval.
Timeframe, Tolerance, Diversification and Knowledge, these are the four strategies which can reduce your exposure to investment risk. You should stay invested for longer in that product with which you feel comfortable. Don’t get stuck to any one type of investment and put efforts to understand the financial world to become a good investor.
So, think, research, understand and decide the best investment option to stabilize your future.