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INVESTMENT
B A S I C S

When you want to learn something new - whether riding a bike or making investments, the question is the same - How should one begin?
Keeping this in mind, we are beginning a series of articles in which we share the basics of investing for beginners.
It's never too soon to start thinking about investing. Investing means putting your money to work to earn more money. Done wisely, it can help you meet your financial goals. These might be buying a home, paying your child's professional education, enjoying a comfortable retirement or whatever is important to you. You don't have to be wealthy to be an investor. Investing even a small amount can produce considerable rewards over the long term, especially if you do it regularly. For example, if you save Rs. 1,000 per month for 30 years @ 8% rate of interest, it grows to Rs. 15,00,295. But investing means you have to make decisions about how much you want to invest and where to invest it. To choose wisely, you need to know what choices you have and what risks you take when you invest in different ways.

INVESTMENT CATEGORIES
There are three basic investment categories -equities, debt and cash. You can invest directly in any or all of them, or indirectly by buying mutual funds that pool your money with money from other people and then investing it. Equity mutual funds, for example, buy stocks, while money market funds make cash investments.

ENORMOUS OPPORTUNITIES
If you want to invest, you have a wealth of opportunities. In the India there are hundred of mutual funds, company fixed deposits and government schemes to choose from. You can also invest in insurance plans or bonds by financial institutions.

CHOOSING THE BEST INVESTMENT
Selecting the best investments depends on your age, income and financial goals. For example, a good investment for a long-term retirement plan may not be a good investment for children's education. In each case, the right investment is a balance of three things: liquidity, safety and return.

LIQUIDITY
How accessible is your money? If your investment money must be available to cover financial emergencies, you'll be concerned about liquidity, or how easily it can be converted to cash. Money market funds and savings accounts are very liquid. So are investments with short maturity dates like income funds. But if you're investing for longer-term goals, liquidity is not as much of an issue.

SAFETY
What's the risk involved? Investing means taking a risk. To many people, the biggest risk is losing money, so they look for investments they consider safe. Usually that means putting money into bank accounts or government schemes. The opposite but equally important risk is that the safest investments will not provide enough growth or income to offset the impact of inflation, the gradual increase in the cost of living. There are additional risks as well, including how the economy is doing. But the biggest risk is not investing at all.

RETURNS
What can you expect to get back on your investment? Relatively safe investments often promise a specific, though limited, return. Those that involve more risk, offer the opportunity to make - or lose - a lot of money.
(To be continued)