Learn how to invest money for beginners. Why investment is so important ?

Today we'll speak about investing. Also, where, how and why to invest? You need to have heard that investing gave your friends returns of 10% or 20%. But you need to have also heard that a number of your friends lost their entire amount while investing. Investing may be a complex process. There are many things we'd like to stay in mind while investing. But before that, let's discuss the importance of investing for people such as you and me.
After working each month, either salary is received or income in business. This money is first used for daily expenses like rent, car expenses and children's fees. After spending such a lot money is left. Most of the people don't know the employment of that cash. the cash that's left after spending should be invested so it works on its own. It continues to get a return, and its future value doesn't diminish. Here the necessity for investment starts in order that the cash gives some return. In simple words, investment is to deposit the remaining money to induce the return.
Let me explain this through an easy example. Suppose I saved Rs 100 and made a bank FD. The bank gave me 7% return in 1 year. So Rs 7 and Rs 100 are my return and investment respectively. Now you want to have understood the meaning and importance of investment. Now let's discuss common investment routes of Indians and their advantages and downsides. But before discussing this let me tell my story. After I got my first salary from my first job, my members of the family and relatives suggested to stay my remaining money in FD after spending it. He suggested me to form bank FD.
Indians always believe that keeping money in an exceedingly bank is that the safest, and it also gives good returns. Like me, most Indian banks have FDs. because the preferred mode of investment because it is that the safest option with reasonable returns.
However, investing has some advantages and drawbacks. Bank FD there's liquidity. In simple words, if the investment in an exceedingly bank FD (like 2 years) breaks down before the required time, then charges are payable. Sometimes the investor isn't ready to get the expected return.
Indians also invest most of their investments in gold. After buying gold, we feel that we've got bought something to recover money in future. But as I told you, every investment has some advantages and drawbacks. One disadvantage of gold investing is that the storage issue of physical gold. Moreover, gold never gives consistent returns. It can give great returns for a few years, while it also can give worst returns for others.
The third mode of investment and also the popular mode for Indians is assets, land means buying land or property. Investing in realty involves investing huge amounts of cash. You cannot buy a plot in thousands by visiting a city.
Minimum investment of Rs. 10, 20, or 30 lakhs would be required. In other modes of investment like bank FDs, one can start investing with  low amount. Land offers great returns in some years while no returns in others. There’s also the matter of frequent return here.

So here we talked about the well-liked investment options of Indians like Bank FD, Gold, or realty. There’s one important thing missing in these investment options which is underestimated by Indians. This is often called compounding. Einstein, a famous scientist, who was once called the eighth wonder of the compounding world. One who understands; He wins, who doesn't, pays for it.
Now let me explain the importance and power of compounding. I’ll explain this through a story. This is often the story of a king and a poet. In some unspecified time in the future the king was playing chess when the poet was reciting his poem. The king is pleased to listen to the poem. The king offered to ask the poet a wish. The poet was wise enough and asked him to first put a grain of rice within the chess box and double it. After this, fill the entire chessboard with 2 grains within the second box, double of two within the third - 4, double of 4 - 8 within the fourth, etc. within the same way. The king thought that it had been low reward sought by the poet. The king began pouring rice grains and located the importance of compounding and its power to finish a kingdom. The rice grains demanded by the poet from the king were converted into kilos. 1.85*10^19 kg. If I consider 1 kg of rice to be capable Rs. 50 and multiply by the number with it, the entire are going to be over Rs 100 trillion. You may be surprised to grasp that in 2017 the entire economy of the planet was up to 70-80 trillion. So this small reward was bigger than the globe economy. This can be the ability of compounding.
That is why it's said that compounding is incredibly important in every investment. Within the future, the compounding power always increases.
Now let me take another story to elucidate the ability of compounding. This can be the story of my friend's father. He started investing at the age of 25 by saving Rs. 10000 during a property once a year with 12% return. For the following 30 years,his total investment value was Rs 36 lakh. But after 30 years of compounding, the investment value will exceed Rs 3 crore. Here you see that an investment of Rs 36 lakhs can exceed Rs 3 crores after a time. This is often the ability of compounding.
Apart from compounding, there's one concept that needs attention while investing, which is inflation. Now you need to be thinking – what's inflation?
Suppose 1 year ago the roti bought by me was Rs 10 but today its price has increased to Rs 12. The cash with which I had bought bread earlier has fallen today. If you're investing and can't beat inflation, your money's value is falling. Anytime you create an investment, you ought to get a minimum return to beat inflation. Otherwise, the worth of your investment could also be falling faster than increasing. You would possibly be thinking that investing is kind of complicated. Let's discuss the asset class investments we are missing which will beat inflation and provides a compounded return. One such asset class that's under-invested by Indians is stocks/equities, i.e. shares. Indians still invest significantly less in stocks as compared to other developed countries like USA.
Now you need to be watching equity, securities market and its working. First of all I’ll tell you about the meaning of Shares and their working. Shares are partial ownership, i.e. owning some of the company's value. For instance you've got a share within the company; therefore you're a shareholder of that company. You own a share and you have got a holding in this company. Because the company's business expands, and therefore the share price rises, you'll make profits. Now the most important problem first time investors such as you and me find different market options to shop for shares. a standard investor doesn't understand and it's difficult to search out an organization that may perform well within the future. Who will solve our problem? How can we invest once we do not know where to invest?
We know that the securities market could be a great medium of investment. But the matter here is that we do not know where to speculate. Mutual funds solve this problem. Now you want to be wondering what's a open-end fund and the way does it work? Many investors such as you and that I do not know which stock to decide on for investment. That's why we make multiple pool investments at one place. For example I deposit Rs 100, and so on, 10 investors put their money. So Rs 100 then increases to Rs 10,000. We give this money to a fund manager who is an informed and experienced person. This person invests in numerous stocks and it gives good returns after we do not know where to take a position. The most important advantage of investing in mutual funds is that it doesn't require investment expertise.
You just have to comprehend your risk appetite and choose a decent investment company accordingly. You’ve got to speculate your money in mutual funds. All the remainder of the concerns are addressed by the fund manager, who will offer you great returns. This in itself may be a huge topic. it's important for us to understand the particular working of mutual funds. There are some expenses related to every investment. it's also appropriate for us to understand the expenses incurred while investing in mutual funds and accordingly it's advisable to settle on mutual funds with low cost. Overall, we want to understand a way to choose the simplest investment company for ourselves.  Also choosing the most effective as per your personal risk.