What is meant by investment?
The act of investing is putting aside money in an investment plan, which can boost said money’s value or generate a source of income. As an individual’s responsibility increases, so should their investments.
Let’s explore the main objectives of investing:
Building wealth: Money set aside, loses its value overtime due to inflation. However, money invested gains the ability to work for you. As your money accrues interest and you also invest said interest, your money will generate even higher interest.
Safeguarding your money: Setting aside your money in interest-bearing assets protects it from inflation as well as being spent. Protecting money’s value against inflation can be achieved by investing, which ensures money is able to maintain its value years later.
Maximising savings: Investing in tax saving products/instruments such as NPS, PPF, ULIPs, life insurance plans, allows you to pay less taxes. Additionally, at maturity these instruments offer tax free returns, thereby allowing you to lower your tax liability.
Creating emergency funds: Saving money for sudden and unforeseen situations is essential, as doing so keeps you financially stable even in adversity. Saving money when you are doing well financially gives you an advantage in emergencies.
Retiring early and easily: Once you are a senior citizen and advised to stop working, you will no longer have a dependable monthly income. Hence, retirement planning is imperative, as it allows you to cherish your retirement in a stress-free manner.
Investing in bigger dreams: Your salary may not be enough to buy a home or car. Thankfully, through regular investments, you can definitely achieve these bigger goals within a few years.
How do investment plans work in India?
In India, investments are classified as short and long-term, which determine their taxability. For short-term capital gains, investors are taxed based on their income tax slab rate.
To delve deeper into investing and which instruments would be best suited to your needs, consult the financial experts at Arthavidhi. Sign up, login, or call to book a free consultation today.
