What is Investment and Reason Why You Should Invest

If you don’t find a way to make money while you sleep, you will work until you die.

One cannot work until death. This is the reason why you should invest in investment. Investment is a acquiring something by money\resources in today and expecting to get more in return in future.

Investing is happening in day to day life. You invest daily. You invest in heath. You invest in education. You invest in house etc. If you invest daily, why you can’t invest in real estate, stock market etc. 

Before that, you should understand the knowledge behind it. By the end of this article you can have answer for these questions.

1. What is meant by investment? 
2. Reason why you should invest in investment?
3. Best long term investment option you can choose to invest
4. When you should invest?

What is meant by investment? 

In Finance and economics, investment is purchase of asset by spending resources usually money and except to give more income in future. In simple terms, investing is spending of money in service/product/ asset and excepting to give profit in the future period. 

People who keep money in locker don’t do any investment. They simply earn, spend and keep the money with them. But they are rare to see in this modern world. Mostly, all would invest in something without knowing them. 

Investing is not only related to finance. It exists in day to day life. For example as I said parent who want their children to learn, invest their money in school / college / other education because to acquire knowledge and earn more money in future with the help of education. People also invest to acquire knowledge, happiness etc.

Risk and Return in investment:

The two face of investment in financial world is Risk and Return. Risk is always proportional to return. 

In Investment, Return of investment is key ratio which decides efficiency of investment. For example you buy a pencil for 3 rupees and sell the pencil for 6 rupees, and then your Return of Investment (ROI) is 6-3/ 3 * 100 = 100 %. For every 1 rupee of your investment, you get extra 1 rupee in return. 

Risk is a factor always associated with investment. From our example, People may not buy your pencil because of high cost or low quality etc. and you may not able to sell these to pencil. Then you will be at loss. In any investment, we should analyse both return and risks in all aspects.

Reason why you should invest in investment? 

The main reason investor must money is to become financial independent by creating wealth. I am not going to discuss about it. The other main reason is inflation. 

Inflation decrease the spending power of money, let us you are living in 2000, then you want fill petrol tank in your vehicle. In 2000, it costs 26-28 rupees for 1 litre. In 2020, it costs 70-75 rupees for 1 litre. In 2020, you can't buy 1 litre petrol with 26 rupees. The today value of 26 rupees not really worth 26 rupees future. The value of 1 rupee today is not worth 1 rupee tomorrow. This is called inflation. To become financial independent, you should definitely beat the inflation. Saving will not save you from inflation. So people look for investment and try to beat inflation and earn more money. 

Best long term investment option you can choose to invest: 

As I said, investment always comes with risks. Nowadays, people were aware of investment. So there is more investment option in order to attract the investor. But as investor, you should select the investment properly. Before investing in any investment, one should ask you that 'Does it make sense'. There are many scams in the investment. You should carefully choose investment you know

Investing in you:

The first investment you should make in your life is investing in you. Because, it will give enormous return. First, you should acquire wisdom/skill/insight/mental model etc and then combine them and apply in various investment. 

Investing in Business:

You can invest in business in order to make more profit from company. You can also invest in your friend's business and other business by giving money /resources to your friend. When that business does well, it may give decent return. 

Investing in Real Estate:

It relates to buying/selling property and land. Most people don't invest much in real estate because they believe it requires more money to invest. But that not case. Many millionaire and Billionaire succeed in real estate. All of them start with zero cash. In real estate, you should start from small. After learning, you should build the kingdom learning from experience in real estate. This is a key to succeed in this investment. 

Investing in Share market:

And finally share market. Many people invest in share market because it requires less cash. You can buy share range from 0.5 paise to 20000 rupees (may be above that). Most shares will be in these range share market is electronic place where investor buy or sell a share securities in any publicly listed companies in stock exchange. It has various types of industries and many companies. When some sectors are down, some sectors are up, so investors can change according. But best investor should invest in share market according to their knowledge (circle of Competence).

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Best time to invest in investment:

Unless you find any investment related to yourself, don't invest even if you have more money. Best investor will not bet on all investment. You should look for misplaced bet. You can misplaced bet when market crashes or any company faces short-term problem. 

Market crashes- the best time:

Market crashes is not only related to stock (share market). Crashes can happen in real estate, business too. Market crashes occur when Supply is high and demand is low. Market crashes give you sudden discount value of precious stock/land/property/business. But you should find it. For that, you should understand the knowledge behind it. 

You should ask some question and find answer for it. Why did it happen? How will these affect the company? Does this company have really cash to survive this crash, I have really money are common question to be asked. If you really have your circle of competence, you can buy good investment during recession. Good investment comes with risk. If you don't find any good investment during recession, then ok you can find it in sometime.

The Conclusion:

As you know about investment, you can choose best investment option available in front of you. Start investing in any of the above investment. You should start investing in 20s because time matter in investment. So, think and learn about it. If you do now, you can earn more.Before doing something, you should ask yourself that why I am doing this? Or did I understand the knowledge behind it. Do you know any other investment, comment in comment section so that other can learn.