WHAT IS INVESTMENT AND THE RULES OF INVESTMENT

what is Investment and the rules of Investment

Almost everyone who earns, believes in saving and tries their best to make sure that they save their earnings and invest them wisely for the future purposes. People get confused with the terms 'Investing' and 'Saving'. Most of the people believe that when they deposit their savings in the bank, they are saving and investing for their future. However, in this era when inflation is on rise, saving in bank does not mean investing.

Depositing money in the banks with a view to invest for the future is not safe in today's generation. For instance, when someone deposit their savings from the earning in the bank every month and they get 4% of interest on the savings on yearly basis. They probably think it is a good investment for them. Inflation is the rate at which the cost of living increases and causes money to lose its value. The rate of inflation in 2017 in India was 4.00%. So, basically saving in bank and increasing your bank balance does not mean that you are investing on your savings. The amount you are saving in your bank with the view of investing it, gets lost in in ever increasing inflation rate. You need to start investing rather than saving the earned money in your bank account as the aim of investment should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. Using goods to get good return on your savings is called real investment.

Everything in this modernised society works according to the set rules. There are some rules set for investing which needs to be paid attention to when investing.

Warren Buffett started investing at the young age of 11 and today he is the best investor of his time. So, one should start as soon as possible. You should start investing when you start earning without wasting your time and money.
One should invest for regular intervals and investment should be for long term.
If you invest in one company, then you might suffer loss as the price of shares might fall or company might het bankrupt or whatsoever. You should diversify your investments. When buying shares, one should prefer buying shares in different companies rather than sticking to one specific company.

In the next post, we will share the points which needs to be given consideration to when investing.

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