What is investment? Why should you invest

First earn money regularly and keep it in bank or in cash and second earn money and invest it. This is the story of two different people. Here the first person will be so far behind the second person which will be beyond his imagination. After all, what did that person do that the previous person did not do?

What are investments

In simple language, investment means to put your money in such a place which will earn you some return in future. You can also consider investment as one of your assets which works to grow your money.

This article is going to change your thinking about the concept of investment. Today we will talk about what investments are, why investments are important and where to invest. Apart from this, all the important questions related to investment, whose answer you need to know in time.

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Why do rich people invest?

How much money are you earning or how much is your salary? They are not that important. Let's say your monthly income is ₹20,000 and your friend's monthly income is ₹30,000. Your friend doesn't invest anywhere, he keeps his savings in the bank. But if you are investing regularly then after 20 years you will be much richer than your friend.


 You (Investment Mutual Fund/Stock Market)Your friend (bank savings)
investment/saving₹4,000 monthly₹8,000 monthly
rate of return12%3%
Total investment after 20 years9.60 Lakh19.20 Lakh
maturity amount40 Lakh26.3 Lakh
In the above example your friend is saving while you are investing. You have reached far beyond that even by investing half the amount from your friend. These are all great investments made in the right way.

Why to invest (Importance of Investment)

After understanding what are investments, it comes down to why to invest?

16-17 years are studied in our India so that we can get a good job. Let's say we got a job but in our education we are never taught how to manage our earned money and how to invest it. The importance of investing is never really taught to us.

(i) Helpful in Wealth Creation – If you start your investment with your first earning or with student life, then you can create substantial wealth in 20 to 25 years. If you start investing ₹2,000 per month at the age of 25 and increase it every year by just ₹100. You will have ₹50 lakh at the age of 50 with an annual return of 12%.

Regular and disciplined investments are the first rule for building wealth.

(ii) Creation of Asset – With a properly managed investment, you start earning so much income from your investment after some time that you do not even need to do any job or business. Compounding starts generating income on both your investment and returns. Investments become an asset for you that works for you 24 hours a day.

(iii) Protection against inflation – If you keep your saved money in the bank or cash, then your money holding becomes less. Yes, if you are getting any item for ₹ 100 today. Let's say this item becomes ₹ 110 after a year. So will the money lying in your bank which has increased to ₹ 103 from interest or ₹ 100 lying in cash will be able to buy this item.

(iv) Helpful in achieving goals – With a disciplined and regular investment, you can achieve your goals. Like you have to buy a car after ten years. For this, start investing a certain amount every month from today itself. The amount you keep investing will start generating returns for you. With this financial planning technique, money starts making money.

Where to invest / Types of investments

After the investment information, the next question comes, where to invest? Which type of investment you should invest in depends more on your goals and risk appetite.

I am telling you some popular investment options in which you can invest.

(1) Stock Market - Share market is the best way to invest provided you have good knowledge about how to choose good stocks. Warren Buffet, Rakesh Jhunjhunwala etc are such people who have become rich from the stock market.

Investing in the lack of knowledge in the stock market can be very risky. Therefore, invest in the stock market only on the basis of correct information and research. In the direct stock market, you can get returns of 15% in the long run. To invest in the stock market, you need to have a demat account.

(2) Mutual Funds – If you do not want to invest in the direct stock market, then you can also invest in mutual funds. Mutual funds are an indirect way to invest in the stock market. Many people invest together in mutual funds which are managed by a professional fund manager.

There are many different types of mutual funds that you can choose according to your goals and requirements. Mutual funds have the potential to give annual returns of 12 to 13%.

(3) Gold - Now let's talk about India's most popular investment gold. Investing in gold is also considered a good option. Gold has been a consistent performer over the years. Gold can give returns around 8 to 9% in the long run. These returns are much less than the stock market but the risk is also very less. If you want to invest in gold, it will be more beneficial to invest in digital gold or sovereign gold bond scheme instead of physical gold.

(4) Real Estate – Real estate is also a very good investment option, in which one can get great capital appreciation in a short time. Investing in real estate requires a lot of money. Because of this not everyone is able to invest in it. But if you are in a position to invest then you can do some part of the investment in real estate.

(5) PPF Account – Public Provident Fund Account is a scheme brought by the Government of India for tax saving with savings for citizens. In PPF account, you get a fixed rate of interest which changes from time to time. In this, you can get a return of 7 to 8%. Also, these returns are also tax free. In PPF, you can save tax as well as get good maturity in the lock-in period of 15 years.

(6) Bonds and Fixed Deposits – You can also invest your money in bonds. In bonds, you have the option of government bonds and corporate bonds. Bonds are in the form of a certificate that you buy by lending money. These are offered with a fixed interest rate which has a fixed maturity date. The risk in bonds is very low.

Apart from this, you can also invest in bank FDs. In my opinion you don't need to keep more amount in bank fixed deposit than emergency fund because the interest rate in bank FD is very low which is also less than the rate of inflation.

(7) NPS – National Pension Scheme presented by the Government of India is also a very good saving cum retirement scheme. If you want to do retirement planning along with investment, then you can also invest in NPS. In this scheme, after the age of 60, you also get pension through annuity. Many tax benefits are also available in the NPS scheme.

Apart from the above-mentioned investment options, there are many investment options available such as Atal Pension Yojana, Sukanya Samriddhi Yojana, you can also invest in these.

Types of Investment

Well, investment can be divided into many different parts. But there are mainly two types of investments.

(i) Safe Investment – In this type of investment options there is no risk or there is a nominal risk. It includes the following investment options –

  • PPF
  • fixed deposit
  • real estate
  • National Savings Certificate
  • Gold
  • Sukanya Samriddhi Yojana
  • Atal Pension Yojana
(ii) Unsecured Investments – Investment options that are risky come under the category of unsecured investments. They have the potential to deliver high returns with high risk.

  • stock market
  • mutual fund
  • bonds

How to get profit from investment?

You can get profit from your investment in different ways. like -

  • capital appreciation
  • dividend
  • Interest
  • Rent from real estate

Do investments always yield profits?

It would not be fair to say that you will also get profit from any of your investments. Investments made without the right information and right research can also give losses. The potential for loss is there in all investment options other than fixed interest rate investment options such as stock market, mutual funds, real estate. But investment done with proper research can give you good returns too.

What are the differences between investing and saving?

There is also a difference between investing and saving which you need to know. When you keep some part of your income in the bank or in cash, then it is called savings. Savings are made to meet your near future needs. In the same investment, you do not keep the money in the bank and invest it in other investment options, so that you get profits in the long term.

Through investment, you can meet future needs like higher education, building a house, marriage in the long term.

When to start investing?

You will get the right benefits of investment only if you start your investment at the right time. There is no fixed age to start investing but the sooner it is started, the better. Warren Buffett, the world's greatest investor, started investing at the age of just 11, due to which he is today one of the richest people in the world.

You should also start investing from an early age, ideally at the age of 25. If you are a student then you can start your investment by saving ₹100 or ₹500 every month. By starting investing at a young age, you have the time to hold your investments for a long time. If you invest ₹ 500 per month at the age of 20, then at the age of 60, one crore rupees can be easily made.

What are the things to keep in mind while investing?

Investments made with thorough preparation are always more effective. Before investing you need to keep the following points in mind.

1. Understand the Investment Objective – Before investing you need to be clear about your goals. You should have the right information about whether to invest for meeting any requirement, for retirement planning or for wealth creation so that you will be able to choose the best option for it.

2. Risk taking ability – You see your risk taking ability, how much risk you can take. If you are above 50 years of age then you should go more with safe investments. If you are young, then you can start with risky investments as well.

3. Understand investing – You should avoid investing options that you do not understand properly. As you do not have complete knowledge of the stock market, then you should first expand your knowledge and then invest.

4. Stay invested for a long time – The longer you stay invested, the more you will get the benefit of Power of Compounding.

5. Diversify Portfolio – There is a saying in finance that “Never put all your eggs in one basket”.

Instead of investing your entire money in one investment plan, invest in different investment plans. This reduces the risk by dividing it into different options.


Investing is a very good habit. A salary class person can also become rich through investment if the investment is made for a long period. In the long run, you also get returns as per your expectation.

Friends, I hope that you will like this information about what are investments or what are investments. If you have any question or suggestion then you can ask me through comment box. If you found this article useful, then do share it on social media networks.

FAQ: (What are Investments)

Who is Investing?
Investing means putting your money in such a place from where your money will be made in the future. That means you get more money.

What are the types of investments?
Investments are mainly of short term, long term, safe and unsecured types.

Which one should one invest in long term and short term investment?
According to the returns, only long term investments can give high returns. Power of compounding is also seen in the returns over the long term.

Which investment plan gives the highest returns?
The stock market and real estate have tremendous potential to deliver returns. But the risk is also the highest in the stock market.