In simple terms, the act of investment involves assigning funds to various financial assets. Investing money into various financial assets which are also referred to as investment tools result in extra income becoming generated. Ideally, investment can act as a secondary income stream and help you in reaching your financial goals. While there was a time when the income generated from full-time employment was enough, nowadays, one needs to have more than one source of income. That’s where the act of investing in the market steps in.
Saving vs. investing: Which option to choose?
The time has passed when just saving a part of the income earned from full-time employment was enough. Thanks to inflation and the pandemic, it is prudent for you to start investing in several investment tools available in the market like mutual funds- and their variations such as equity mutual funds. Moreover, if you are interested in allocating funds in mutual funds but don’t have the time, don’t worry, you could still opt to invest in mutual funds online. But, if you are wondering which is better between saving and investing, the answer is both. You could save money from the income earned from full-time employment and invest them in mutual funds.
If you are still wondering why, you should consider investing as a secondary income revenue, listed below are five reasons:
- Investing may help you to be a part of new businesses:
New business ventures need the backing of money. For the said financial backing, they look to investors. If you are the kind of investor who may like the excitement of investing in a business that does not have the market capitalisation as of now, but, shows great potential for growth, you could opt to invest in the business and therefore may even become a shareholder.
- It may help you to save for retirement:
When you are a part of the job market, you should be saving money for retirement. While working, you should put your retirement savings into a portfolio of investments, such as mutual funds, stocks, real estate, bonds, businesses, or other investment options. After reaching retirement age, you can live off funds earned from these investments.
- You can enjoy a stable income:
To grow your money, you need to invest a part of your income in investment tools that can help you earn a high rate of return. The higher the income you earn off the investment plan, the more will be your wealth accumulation for the future. Investment vehicles usually offer investors the opportunity to earn higher rates of return than conservative schemes. Hence, if you are looking for the chance to earn a higher return on your investments, you will need to look at investing as an option to make money.
- Investing may help you to reach financial goals:
Another major advantage of investing is that it can help you reach your financial goals. By investing a part of your income in an investing tool like an equity fund, you will be earning a stable income over the long term. The income earned on your investments can be used toward major financial goals, such as buying a home, buying a car, starting your own business, or putting your children through college.
- It may help you to cushion the impact of inflation:
Inflation is among the crucial reasons why you should consider investing. According to estimates, the annual inflation in India exceeds 5%. Simultaneously, food and medical inflation is approximately 9.8% and 5 %, respectively. To put it simply, a loaf of bread which costs you ₹30 today may cost you roughly around ₹50 after five years. Therefore, the revenue from your savings may not help you in combating the raging prices. To combat inflation, you will need a more effective tool. That’s where a mutual fund investment may step in. Market investments supposedly give an average annual return exceeding 12%. Therefore, you will not only be able to win inflation, but you may have extra money to live your life.
Investing teaches you to handle money effectively. It also showcases the importance of saving and the drawbacks of debt-based spending. An investor will learn how the market operates. Therefore, please start investing to take the leverage of this habit in future.
Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.