Investment refers to the allocation of funds into instruments like mutual funds, stocks, bonds and ULIPs with the motive of building wealth over the long term. Though investments come with risk, they endow the potential to offer higher returns and are essential for attaining big-ticket goals such as buying a dream home or funding your child’s education.
Investing can be done on a one-time basis or on a regular basis using strategies such as dollar cost averaging. The best option is to start investing early as time is your biggest ally when it comes to creating long-term wealth through the power of compounding. You can gradually increase your exposure to higher-risk options like equities while simultaneously decreasing your dependence on safer alternatives as you move closer to your goals.
Before deciding what to invest in, understand your financial situation including your comfort with risks and your goals. It’s also a good idea to seek the advice of a financial professional.
A key lesson to remember is that saving stores your money, but investing protects and grows it. In fact, investing is the only way to get your money to work for you by letting it grow through a process known as compounding. You can achieve your dreams of owning a flat or a car, funding your child’s education or a world trip by smartly aligning your investments with your goals and timelines. This will ensure that you use safer, income-generating investments for short-term goals while moving into growth-focused investments as you approach your milestones.