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How do I invest money?

 Why should you invest?

Working as an employee, entrepreneur, or freelancer helps you earn an income with which you can live a comfortable life. And after you have satisfied all your immediate needs, you will most likely be left with some disposable income.

How do I invest money?

What do you do with this disposable income? Do you treat yourself to some luxuries? Do you keep it as cash or leave it in your bank? Or do you put it to work in a way that earns you a decent return? This is where the question of how to invest money comes into play.

Investing your money is just as important as earning an income. Prudent investing helps make your life financially secure by helping you achieve your financial goals for the present and the future.

Investments help you create a parallel income stream, build more wealth, and earn returns that outpace inflation. They ensure that you can continue to live comfortably after retirement, when your regular income is gone.

Types of investments in India

Today's India is a hive of financial activity, offering different types of investment options that cover a wide range of investment possibilities. You can simply keep cash at home or choose to invest in:

  • Insurance plans.
  • Mutual Funds.
  • Fixed deposits, Public Provident Fund (PPF) and small savings accounts.
  • Real estate.
  • Stock market.
  • Commodities.
  • Derivatives and foreign exchange.
  • New investment categories.

Each of these investment options has its own characteristics, and it is up to you to decide where to invest your money and use these options to achieve your financial goals.

Consider your needs for liquidity, wealth accumulation, parallel income sources, safety of principal and life insurance.

Investing money for beginners

The list of investment options described above is relatively complete. However, not all of these options are suitable for beginners. Investing money for beginners is difficult if you are not familiar with the intricacies of the various investment options.

It might be wise to limit your investments to insurance-linked financial instruments, mutual funds and time deposits, PPF and small savings accounts.

Best ways to invest your money

Insurance plans

These instruments are great for young beginners on a fixed income. You can take out pure protection plans such as term insurance, which will provide financial protection to your family in case of your unfortunate untimely death.

The other option is plans that combine savings with insurance, such as Unit Linked Insurance Plans (ULIPs). Other insurance plans include health insurance, critical illness insurance, and accident insurance.

Open-end funds

Mutual funds are a popular investment option for beginners. Mutual funds give you the advantage of investing indirectly in the stock markets through the expertise of professional managers.

Since you are busy with your work, job or business, you may not have the time to follow the stock market and make direct investments. This is where mutual funds come into play.

You have several options, such as stock funds, bond funds, balanced funds and other such instruments. There are also plans that offer dividend income or growth options. You can make choices based on your financial goals and risk tolerance.

Mutual funds offer ample opportunities to provide liquidity, income, growth and security.

Time deposits, provident funds (PF) and small savings

Fixed deposit accounts, Provident Fund (PF) and small savings accounts are safe instruments with moderate returns. They offer better liquidity and security.

If you are an employee, you can opt for voluntary PF in addition to PF. Small savings plans are also suitable for beginners to earn a decent income.

Tax benefits

Several investment options offer tax advantages*. It is important to weigh the trade-off between tax benefits and returns when investing.

Investing money in India is not that difficult if you follow the above investment tips. Remember that the smartest thing to do is to understand investments and start early.

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