Investment refers to savings or deferred consumption, which is made by the individual to risk his savings in the hope to gain some returns. Investment is viewed differently in terms of economics and finance. In terms of finance, the goal of investment is to produce future cash flows and in terms of economics, investment is the production of goods for a period which are not consumed but utilized for further production.
The most important reason to invest your savings is to beat the inflation, to achieve financial goals and to plan for retirement. Inflation means paying more for the same goods and services in future. When trying to achieve financial goals like buying house or paying education you need your money also to earn along with you in order to beat inflation. You also need to invest in order to fund your needs when you become old and not capable of earnings (i.e.) plan for your retirement.
How to invest?
The type of investment option to choose depends on what you are trying to achieve. Those were the days when the marriage or education of child were expensive but were affordable and investment avenues of that days earned you a good rate of return. So they were manageable with minimal planning. But these days with rise in inflation and with lower rate of return has worked against parents in their mission for a better quality of life for their children. Commencement of planning at an early stage of the life is an important step in the process. Investment avenues like equity funds that offer tax-free returns over longer time frames to manage child’s education/marriage or retirement.
Choosing the right investment product is a difficult task for investor. This task is even more difficult when it come to senior citizens as they will have limited amount. Life will become miserable if they does not have regular source of income. As a result senior citizen should do the balancing act between the return and risk of his investment. For senior citizen, the risk element should be low as much as possible.
For individual investor the objective is to maximize the return on their investment. An individual can maximize return at cost of high risk. The investment options available to investor are equities, fixed income securities, debt, foreign securities, real estate and e-currencies. While investing the constraints of the government rules and regulations and that of investor financial capability and availability of time should be kept in mind.