Saving money is important, but it’s only part of the story. Smart savers start by building sufficient emergency savings within a savings account or through investment in a money market account. There are many potential benefits to investing in the financial markets after you have saved three to six months’ worth of living expenses in liquid assets. This article will go into importance of investment in detail and provide some examples for your convenience.
We do not live in a world where we take each day as it comes. Financial emergency may arise at any time. It is needless to say that having a savings/investment portfolio is important. Money can use for both making and storing purchases. Money matters and is important for survival.
Top 12 – Importance of Investment
One thing that the continuing coronavirus epidemic has taught us is that we cannot exclusively rely on your normal income. If we Are unable to obtain our usual money for some reason, we can find up in immense troubles. To mitigate this risk, you will need to have a second line of income which will help you to sustain yourself in times of such crisis. This can be your investments in Fixed deposits, equities, Mutual Funds, properties, and other assets. These investments will allow you to get by in relative comfort in the event that you lose access to your regular source of income. Check out these importance of investment to broaden your horizons.
Provides Regular Income
Most people who are getting close to retirement age rely on income from investments. Life after retirement becomes difficult since many people do not receive a monthly salary to sustain their daily needs.
There is a range of investments that individuals can depend on, including bonds, equities, and investments, to provide regular income in the future after retirement. Individuals ensure effective investment management in order to cater to their needs after retirement.
High Rates of Interest
Another aspect which is necessary for a sound investment plan is the level of interest rate. Interest rates vary between one investment and another. A high-interest rate may not be the only factor favouring the outlet of investment.
Reason to be Careful
This means taking precautions. People hold cash to deal with contingencies like unemployment, health issues etc. They want to keep a part of contingency liability aside to us it in case of an emergency. This is good importance of investment.
For the Safety of the Family
If something happens to you, your family should well take care of. Having a savings and an investment portfolio ensures it. Savings and investments are mutually connected. It is important to have a savings nest so that you are more in control of your future and life. Invest in HDFC Life’s various savings plans to secure your future.
A Bigger Paycheck
With the increase in employment opportunities, investment decisions have assumed importance. With Independence came new development and, and with development came new organizations like the IBPS, UPSC, PSU, Financial Institutions, expansion in public sector etc. This gave rise to employment opportunities to both men and women. This, in turn, gave rise to better income and larger investments and opportunities for an investment advisor.
Minimizes Tax Burden
Taxation is one of the crucial factors in any country which introduces an element of compulsion in a person’s savings. There are various forms of savings outlet in our country in the form of investment which will help in bringing down the tax level by offering a reduction in personal income.
Some examples of tax-saving investment are–unit trust certificates, unit-linked insurance plans, national savings certificates, bonds, post office deposits etc.
To Reach Money Goals
Investments are meant to save money and ensure investors receive higher returns in the long run. However, investing also assists in reaching both immediate and long-term goals without much stress and trouble. Businesses focus on expanding after a certain period, which creates the need for financial stability.
Similarly, people save for a variety of reasons, including future educational or housing expenses. Thus, people and companies can reach their financial objectives through bond, stock, and mutual fund investments. This is the best importance of investment.
To Earn more than Inflation
Inflation is a significant threat to an investor because it erodes the current real savings and future returns. Rising inflation also chips away from the value of the principal on the income securities. Investment management helps to outperform inflation and allows clients to grow their income without inflation challenges.
For investment savings to grow over time, the rate of return after tax must be greater than the inflation rate. In today’s economy characterized by low interests, it may be challenging to find a savings account with higher returns than the inflation rate. Therefore, investment management is essential to help clients outperform the market inflation rate.
Solves Financial Circumstances
The financial needs change over time, and emergencies are likely to occur. Investing sooner leads to faster growth of the investment money. Having an investment manager on your side can be a lifesaver, especially in uncertain economic times.
With careful investment management, clients can tailor their portfolios to reflect their changing financial needs and priorities. For example, individuals or businesses may force to use savings to solve emergency problems. Thus, effective investment management is essential to save enough money for emergency purposes.
Reasons for Making a Deal
People put money aside to help them get by in the time between getting paid and spending money. The amount depends on the interval at which money is received. Businessmen and entrepreneurs have to keep some part of their income to meet the current needs. Amount held in liquid will depend on the business turnover. Transaction demand for money stays constant at all levels.
More Likely to Live Longer
Investment decisions have become significant as people retire between the age of 55 and 60. With the improvement in medical technology, people have a longer life expectancy. With longer life expectancy people need more money to live comfortably. Money should investe in such a way that they get a fixed income every month even after retirement.
Education for Children
The most important thing for a person is to educate his children and send them to the best school and college. It’s important to have savings for that so that you can provide your children with the best education. Self reliance- When you save, you get a feeling of self reliance and power to do things. It gives you a feeling of independence. This is the importance of investment.
Should you Buy or Save?
There is far more risk involved with investing because the value of your money can rise or fall depending on the day-to-day fluctuations of the market. “An FDIC-insured savings account is nearly risk-free for short-term savings and is not subject to market fluctuations,” says Sebastian Rollén, senior investing researcher at Betterment.
What should be your Primary Goal when you Invest?
The priority for an investor is sufficient liquidity. Liquidity allows an investor to buy and sell quickly without spending too much money on processing costs. Additionally, it allows an investor to ditch losing investments when a downward trend is observed quickly. Holding on to illiquid assets can lead to losses.
How Often should I Put Money into Investments?
At minimum, you should plan to invest on a monthly basis. Though, in the interest of convenience and consistency, many people choose to invest at the same frequency of their pay cycle. This is why automatic retirement contributions through your employer can be so effective.
Long term investments align well with big financial goals, like funding for your child’s education or wedding, buying a house, or saving up for retirement. They give you time to build your wealth slowly and steadily with short term tax benefits and allow you to save for significant milestones in life without hampering your current goals and lifestyle.
However, every long-term investment option must choose carefully. You must understand the risk factors attached to an investment plan before making a decision. Check out these importance of investment to broaden your horizons. For a more extensive education on elements of investment, keep reading.