What are the things to know before investing

What are the things to know before investing

Investing is a great option, but before you venture into investments it is good to be aware of the following…

1. Risk and Return go hand in hand. Higher the risk, higher the return. Lower the risk, lower is the return.
2. Investment in fixed income is a good option if you want to protect your principal amount. It is relatively less risky. However, you have the risk of losing money when you adjust the return for inflation. Example – A fixed deposit which gives you 9% when the inflation is 10% means you are losing a net 1% per annum. Fixed-income investment is best suited for ultra risk-averse investors
3. Investment in Equities is a great option. It is known to beat inflation over a long period of time. Historically equity investment has generated returns close to 14-15%. However, equity investments can be risky
4. Real Estate investment requires a large outlay of cash and cannot be done with smaller amounts. Liquidity is another issue with real estate investment – you cannot buy or sell whenever you want. You always have to wait for the right time and the right buyer or seller to transact with you.
5. Gold and silver are known to be a relatively safer but the historical return on such investment has not been very encouraging.