Investing For Beginners – Free Investment Articles and Tutorials

The purpose of financial planning for oneself is to use money in such a way that it generates more money. Savings accounts, stocks, bonds, mutual funds and other investment options are some instruments that offer such possibilities. However, such investments should be made with great care. One must ensure that the rate of return is sufficiently higher than the rate of inflation.

It is important to note here that the value of a given amount of money changes over time, a concept known as “time value of money”. While making investment decisions one needs to be aware of this concept. Money that is not invested or money that is growing at a slower rate than the rate of inflation becomes less in value, as time passes. Therefore, investing wisely is the only way to protect your money and ensure returns.

Every individual must have a financial plan. This plan should look at four issues: the amount of money to be invested, the purpose of investing, the risk involved and the investment time frame. The first decision is easy. The amount to be invested is the sum left after making provision for day to day expenses. The second involves taking a decision as to how much money is needed for health insurance, life insurance etc.

The third is allocating money for investments in growth assets like shares, mutual funds, property etc. These investments provide high returns but also come with an element of risk. The level of risk has to be determined according to one’s own comfort level. The best is to manage the risk by spreading assets across different investments like cash deposits, fixed interest investments, property, shares, etc.

The last is time frame. Those who start early can take greater risks and invest more in risky instruments. Those who start late must invest more in retirement plans, where the returns may be low but are guaranteed. Further, investments should be made only after clearing all dues and debts, especially the credit card debt as they carry interest paying liabilities.

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