What is investment? how to do Investment?

 

What is Investment Definition? 

An investment is essentially an asset that is created with the intention of allowing money to grow. The wealth created can be used for a variety of objectives such as meeting shortages in income, saving up for retirement, or fulfilling certain specific obligations such as repayment of loans, payment of tuition fees, or purchase of other assets.

Understanding the investment definition is crucial as sometimes, it can be difficult to choose the right instruments to fulfill your financial goals. Knowing the investment meaning in your particular financial situation will allow you to make the right choices.

Investment may generate income for you in two ways. One, if you invest in a saleable asset, you may earn income by way of profit. Second, if Investment is made in a return generating plan, then you will earn an income via accumulation of gains. In this sense, ‘what is investment’ can be understood by saying that investments are all about putting your savings into assets or objects that become worth more than their initial worth or those that will help produce an income with time.

Financially speaking, an investment definition is an asset that is obtained with the intention of allowing it to appreciate in value over time. Generally, investments fall in any one of three basic categories, as explained below.

Types of Investments 

The question ‘what is investment’ is mostly followed by understanding your investment objectives and identifying where to invest. Keeping aside investments in real estate and assets like jewellery and all, when it comes to different instruments, another aspect of understanding ‘what is investment meaning’ is to know about different types of investments. The first refers to equity investments, and the second category includes debt instruments. If your investment objectives match, equity investments can offer greater returns and carry relatively higher risk. While debt instruments are less risky, but offer relatively low returns.

Further, what is investment meaning can also be understood from the perspective of how they are acquired.

Following are different types of investments in India:

1. Stocks

This includes shares of ownership of any company and helps you earn dividends in return.

2. Bonds 

Wondering what is investment meaning in terms of bonds? It means lending your money to an institution or government, for which you receive fixed interest at regular intervals and also the face value upon maturity.

3. Mutual Funds

In this, funds are collected from different investors and put in a company’s bonds or shares, which are managed by fund managers. On understanding what is investment meaning and your investment objectives, you may choose equity funds or debt funds, depending on your risk capacity.

4. ULIP

ULIPs or Unit Linked Insurance Plans are a type of investment that provides both investment and life insurance benefits. A portion of the money invested into ULIPs is allocated for investment, meaning in this plan a part of your premium is invested in different funds and helps you earn market linked returns. It also offers tax-saving benefits of up to Rs. 1.5 lakhs under Section 80C.

5. Public Provident Fund (PPF)

Understanding investment meaning of PPF is simple. It is a government offered saving scheme that invests your funds for a specific period and helps you earn returns on the same. It provides an 8% interest rate starting 1st October 2018

For your benefit, you may also find out what is investment for tax saving and invest in such plans. Also, as discussed earlier, when you ponder over what is investment meaning and similar questions, consider adding term plans and health insurance policies in your portfolio for securing your family.

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