Investments are something wherein you invest your money to earn profits. You have a large number of options to invest your hard earned money such as funds, shares, property or fixed interest securities. Rather than putting your money in some savings accounts, the better idea is to invest it somewhere, so that you can get higher returns. Higher the risk, greater will be the returns from investment. The returns may be in the form of dividends, rent, and interest. The overall risk can be minimized by putting your money in different assets, commonly known as diversifying. The amount of risk you are willing to take, your finances and future expectations will help you in making the right investment choice.
Frequently Asked Question
Advantages of Investment
Investment provides a lot of favorable opportunities. Some of them are listed below:
- Good returns in a short time span
When one chooses to invest their assets and resources into security exchanges, there is an increased possibility of greater profits and enormous benefits. Despite the fact that you expose yourself to tons of risk, you are likely to experience good returns in a short time frame.
- Dividend Reinvestment
The profits and other premiums can be reinvested to buy extra offers, thereby developing your investment.
- Risk reduction
Diversification of investments results in decreased portfolio hazards. When the resources are put into several distinct securities ,the overall risk tends to reduce to a great extent.
- Prevents too much spending
When you make investments in a business, you tend to avoid unwanted expenditure by investing only in the equipment and material you need to.
Disadvantages of Investment
However, investment also has a few disadvantages such as:
- Volatile investment
Due to the market being volatile, investments are subjected to wide risks. Regular fluctuations in prices may expose you to uncertainty and higher risks.
- Strain your personal life
Indeed, financing your business may strain your life, when you are left with insufficient funds to meet up your daily costs. In such a case, you should leave a contingency fund for such unforeseen situations.
- Tax inefficiency
Investors get their share from the funds that are uncontrollable tax events. Hence, they are left with no choice when it comes to availing tax benefits.
- Less Profit Margin
Whenever investors buy or sell his shares, a brokerage commission is needed to be paid to the broker, which may reduce the overall profit margin.
- Time consuming affair
Making investment is not an easy job. It not only requires a lot of time but also too many efforts to think about investment avenues.