Before we tell you some basics of investment, we must tell you what exactly is an investment. We know that this is something we should have learnt in school albeit, it’s okay, let’s do it now. 

Learning about investments is like learning a new subject and a rather expensive one. It can be overwhelming and seem farfetched with all the terms and whatnot. 

But today is your lucky day! This guide will help you simplify some investment basics and help you make wise investment decisions.

Before we get into anything, let’s tell you what are investments. Investment basically means putting aside some of your income with the agenda to make money on it. Investing also ensures that you have a security net in cases of emergency or for your future. 

Against common myth, you don’t always need a large chunk of money to start investing. You can start investing with as little as ₹100. 

Pro tip: Start Young.

The sooner you start investing the better it is going to be for you. This will help you build the habit of putting aside some of your income regularly. Starting early can also help you get better returns and an overall better understanding of how investments work. 

Since this is a basic guide and we don’t mean to overwhelm you in any way, we have prepped a  simple list to get you acquainted with investments

Equity

Let us start by addressing the elephant in the room and most talked about investment tool- equity or stocks. Stock essentially means that you own a part (share) of an organisation that you invest in. For example, you invest in Tata Steel. By buying its stock, you own a certain percentage of the company. So if Tata Steel makes money you make money too.

Assuming, you are someone who is new to equity investments, it is best you start with companies that have a long-standing reputation and have been profitable for the past few years. It is also important that you continuously read and learn about the company To ensure that your investments are safe.

If you have made up your mind about investing in stocks, you need to open a Demat Account with any brokerage firm. It is with this account that you’ll be able to buy and sell stocks for any company.

Mutual Funds

Mutual Funds are another basic way to invest your money. Unlike equity where you do the majority of the work Mutual Funds are managed by a Fund Manager who is an expert at their job. Every fund house has stocks, bonds in different proportions. As a result, the risk that you take is lesser than directly investing in stocks as your money is diversified. 

There are three broad categories of mutual funds

  1. Equity Funds

In Equity Funds, your money is invested in stocks by the Fund Manager. You can choose to invest all your money at once which is known as lumpsum or contribute a certain amount every month which is known as SIP ( Systematic Investment Plan)

  1. Fixed Income Funds

Popularly known as Debt Funds are ideal for risk-averse investors. Here, the majority of your money is invested in Fixed income securities such as Govt. debentures, bonds, and securities.

  1. Hybrid Funds

In a Hybrid Fund, your money is invested in more than one asset class. Part of the investment goes towards equity or debt, and the other part towards other assets depending on the mutual fund’s objectives. This ensures optimal returns with limited risks.

Government Securities

If you are someone who wants a no-fuss way to invest and does not want to indulge in risk, Government Securities are your best bet. When you invest in Government Securities or Government Bonds, you lend money to the government. The government in return pays you interest which is known as a “coupon”.

You can get either a fixed rate of interest on your investment or get something known as a floating rate of interest. The floating rate of interest means that your return rate will keep varying from time to time.

The interest rate that you get when you invest in bonds is higher than a bank’s savings account. However, it comes with some risks. 

Gold

The age-old method of investing- gold- is still as relevant as it was before. People generally invest in gold for cultural or religious reasons but it is also a very sound investment to make. Gold is a great store of value in long term. Store of value means it is an asset class that has maintained its value without depreciation. 

Gold also offers high liquidity and can be bought and sold in a very short period of time. What makes gold a great option to invest in is the fact that you do not need prior knowledge as you would in the case of mutual funds or equity.

You can invest in Gold in different ways such as:

  1. Digital Gold 

It is one of the most cost-effective and convenient ways to invest in gold today. You can buy digital gold at the comfort of your home anytime, anywhere. You can also choose the purity of the gold you want to invest in and can start investing with as little as ₹10. Digital gold prices correspond to physical gold prices.

Digital gold offers more security than physical gold as it is stored digitally and are secured with various encryptions. Apart from that, many companies offering digital gold also insure them for you. You can buy digital gold from Freecharge using any mode of payment in a secure and easy manner. Digital gold can be converted into physical gold at any point you like. Freecharge has various partner stores where you can exchange your digital gold for exquisite pieces of jewellery.

  1. Gold coins and bars

If you are someone that likes to keep gold at their own houses then physical gold is a good option for you. You can invest in physical gold in various ways such as gold coins, gold bars or jewellery.

However, we suggest that you opt for gold coins and gold bars as they offer more flexibility, liquidity,  and there is no making charge on these. 

Real Estate

This is a great way to invest if you want to invest and forget. An Asset such as residential property or commercial property, land, etc. appreciates in value over time. It can be a great investment for personal use or can be rented out for a regular income source. However,  investing in property requires a significant amount of money. 

Fixed Deposit

You can also invest in Fixed Deposits popularly known as FD. Fixed Deposits done with banks can secure your money for a fixed period of time as per your liking and you can earn a pre-decided interest on this investment. It is a fairly secure way to invest however the returns may not be as lucrative as the others.

At the end of your tenure, you get back your principal amount and the interest that you have earned on it.

Now that you know some of the most popular ways to invest and how it is done, which one are you going to choose?

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