The fundamentals of Investment

Traditionally, people are tuned by their families to save money for the future. However, not many families have a history of investments which makes it a second choice. However, merely putting funds aside without investing them can be counterproductive for a variety of reasons:

• Inflation – An inflation rate of 10% means that if you save ₹100.000 today, then after one year it will be worth ₹90,000 only. Saving without investing can eventually lead to a shortage of funds in the future when you try to use your savings. Many investment options offer returns factoring in the rate of inflation.
• Small expenses corrode the savings – Liquidity is good for emergency expenses. However, having access to funds at all times can lead to unnecessary small-ticket expenses which can eventually eat into your savings.
• Ill prepared for big-ticket expenses – Savings are good for short-term and small-ticket expenses. But for large-ticket expenses like children’s education or retirement planning, investments are a must.

The biggest benefit of savings is the liquidity it offers. By defining your investment objective to include a certain amount of liquidity, you can get the best of both the worlds. Savings come first, but it is investment that can help you build a future on the foundation provided by savings.