Investment is the process of putting savings into assets or objects that will either grow in value over time or help you earn income by way of profit or return. When you invest, you do not expect to get any immediate returns on your investment, but you are willing to wait and watch it grow over a period of time. Investment can be made in a number of instruments such as real estate, market linked investments plans (ULIP full form: Unit Linked Insurance Plan), and other financial products that help generate income over time.
Investing is different from saving money, which only earns you a small interest rate over the short term. However, investing can lead to substantial future returns, if done right.
The first step to successful investing is setting goals and a timeline for your investments. You can also take help from a professional to analyze your financial situation and determine your risk tolerance and investment objectives. Then, you can choose suitable investment plans that match your objectives.
It is important to understand the difference between low-risk and high-risk investments. Generally, investing in stocks is considered higher-risk than investing in bonds or fixed deposits. Low-risk investments can include mutual funds, retirement accounts, and equities (stocks).
Another factor in deciding how much risk you are willing to take with your investments is your time horizon. Your investment goals may be short-term, like buying a car, or long-term, such as retirement.