Introduction

This is an attempt to make aware about of one of the most important part of our life, that is Investments. Many are not aware of its versatility, options and returns one can get from different investments. Placing same amount of money for same duration of time can give comparatively small to large returns or profit, depending on type of investment and risk it involves.

 A set of different investments or Investment portfolio shall suit to once financial goals and risk profile. Accordingly, one can diversify his savings in different investments and move towards planned wealth creation. The bottom line is “Make your money work for you else you will only work for money”. Placement of capital or money in certain business or asset (something of any value), in expectation of deriving profit or income from its operation or appreciation is investment.

 Now money can be invested either in once own business/ asset or someone else business. A salaried person, professional or businessman can smartly invest his money, in some options, choosing from a number of options, which suits his objectives and risk-taking capabilities. Risk and returns are directly proportional, i.e., higher the returns, higher is the risk, and vice versa.

 Investment products fall into two types financial and non-financial assets. Financial assets can be classified into market-linked products like mutual funds or equities and fixed income products like fixed maturity plans (FMP) or bank fixed deposits. Non-financial assets are non-operating physical assets like gold and real estate. While selecting an investment, one has to match once own risk profile with the risks associated with the product before investing.

 There are some investments that carry high risk but have the potential to generate high returns, much more than inflation rate while some investments

carry low risk and therefore lower returns. One has to plan smartly and invest in fixed-income and market-linked investments so as to initiate the process of wealth creation. While market-linked investments help in navigating the volatility and in the process generate high real return, the fixed income investments help in preserving and expanding the accumulated wealth, and on maturity use the same for desired purpose.

 For long-term goals, it is important to make the best use of both tools. Have a judicious combination of investments keeping risk, taxation and time horizon in mind. In other words, this can be termed as Diversification of Investments or asset allocation. Diversify your funds to get good returns based on your risk appetite and period of investment and add a variety to your financial portfolio.

An investment portfolio is a collection of assets owned by an individual or by an institution. Asset allocation involves dividing an investment portfolio among different asset categories, such as mutual funds, stocks, bonds and cash.

 Against the background of the asset allocation, Financial Planners/fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned investments/ holdings accordingly. The list will indicate what percentage of the fund should be invested in each particular stock or bond or fund or Government scheme.

 It is important to compare the long-term returns of different assets in different investments. Over long holding periods e.g. around 10 years or more equities have generated higher returns than bonds, and bonds have generated higher returns than cash or high liquid assets. According to financial theory, this is because equities are riskier (more volatile) than bonds which are themselves riskier than cash. Cash investments means money in bank accounts such as savings accounts, term deposits etc and provides regular, low-risk income in the form of regular interest returns.  'Cash' is used to determine the state of money, which is liquidity. It means the money is readily available for any intention.

 Investment management is the professional asset management of various securities (shares, bonds and other securities) and other assets (e.g., real estate, gold) in order to meet specified investment goals for the benefit of the investors. Investors may be an individual or private companies or institutions (insurance companies, corporations, charities, educational establishments etc.). Investment can be done via collective investment schemes e.g. mutual funds.

Investment Advisor refers to both a firm that provides investment management services and an individual who directs fund management decisions.

Liquidity is ability of how fast an investment or asset can be converted into cash without affecting market rate. For example, Gold is highly liquid and Real estate asset is highly illiquid. It is an important factor which should be considered while investing in an asset. Liquidity might be your emergency savings account or the cash lying with you that you can access in case of any unforeseen happening or any financial setback. For example, cash and savings account are liquid assets because they can be easily converted into cash as and when required.

 There are liquid mutual funds which are simply debt mutual funds, in which money can be invested for even one day or few days up to three months. Here your money is invested in very short-term market instruments such as treasury bills, government securities. Liquid funds offer safety, low risk and reasonably good returns, compared to savings accounts or even short-term fixed deposits. They offer full flexibility of redemption at any time.