What is Investment: Meaning, Types & Objectives of Investment

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Types of Investments
Types of Investments

You may have heard your parents and friends asking you to start investing in different schemes to secure your future.

But, what is an investment? In simple terms, investment is an asset that you create with the intention to let your money grow over time.

The wealth you create can be used for various future purposes like meeting an emergency expense, creating a corpus for post-retirement expenses, accomplishing future goals like repaying a home loan, buying a new house, paying a child’s education fees, etc.

Knowing the true meaning of investment is vital as it can help you choose the suitable instruments to help you fulfil your financial goals.

Investments can generate returns in two ways. If you invest in a saleable asset, you may profit from it. Second, if you invest in money market instruments, you can earn through bonuses or dividends.

Types of Investments

Mutual funds

Mutual funds are one of the most popular types of investments in India. Many people prefer investing in mutual funds mainly because of their high returns potential.

There are different types of mutual fund schemes, and you can invest in any scheme based on your financial objective, risk-taking capacity, and expected returns.

ULIP

Unit Linked Insurance Plan is a unique financial instrument that offers dual benefits of insurance protection and investment opportunity.

A part of the premium you pay for ULIP is used to provide insurance protection. The balance amount is invested in different assets as per your risk appetite and financial goal.

ULIP is one of the most popular investment plans as it allows you to build a corpus for the future while securing your family’s future and enjoying tax benefits.

Fixed deposits

This is another popular investment instrument in India. You can open an FD account with any bank or post office. It offers fixed returns.

Other popular types of investments include PPF, NPS, bonds, stocks, etc. You can choose any investment you want to suit your needs.

Investment objectives

Different people invest in various instruments for different purposes. However, most people start their investment journey to meet the following objectives:

To keep your money safe

One of the crucial investment goals for people is to keep their hard-earned money safe and secured.

By parking funds in specific investment instruments, life bank savings accounts, fixed deposits, government bonds, you can save your money from being depleted.

Although such investments offer minimal returns, you can easily accomplish your goal of capital preservation.

Capital growth

Generally, most people start their investment journey to let their money or capital investment grow and build a sizeable corpus over time.

To let your money grow, you must consider specific investment instruments like mutual funds, real estate, and equity-oriented funds.

Although such investment avenues may have a high-risk potential, the rewards you get are high too.

To get a steady income

Investments can be an excellent source to generate a secondary income. If this is objective, you can invest in instruments like fixed deposits that pay regular interest or stocks of companies that pay regular dividends.

Income-generating investments like NPS and other retirement plans can help you meet your everyday expenses during your post-retirement life.

Apart from the above objectives, some people may invest for specific purposes like reducing the annual tax liability, building a corpus for retirement, accomplishing long-term goals, etc.

Final World

Now that you are aware of what investment is, types and objectives, make sure that you know your specific purpose and start investing in the right instrument from an early age to accomplish the goal faster.