What is Investment and What is Its Purpose?

Different people possess different notions and understanding of “investment”. To start with, first of all, let’s try to get a clear understanding of what is investment and how it can be useful for the folks. Investment is an act of buying assets or items that help you generate income in the long run. Economically, it can be defined as the act of purchasing assets or goods that won’t be consumed today but will be used to create wealth in future. While in financial aspects, one can define investment as an act of buying monetary assets in order to receive income from it in future or selling it later at a higher price for profit.

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7.7 Crore

Registered Consumer

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Policies Sold

Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

To elaborate the concept of ‘what is investment’ from financial point of view, it means that the investor invests or commits his money or cash in either security, financial assets or in bond issued by the government or the financial institutions with a hope to accumulate more cash in their account.

Investing money in a bond or equity not only brings a lump sum amount to the pocket of the investors but it also assists the government to expand its on-going projects. This is one of the primary reasons the government encourage and people choose this investment option.

There are different types of investment plans that a consumer can go for. However, before getting into details of different products of investment, it is essential to understand that there are basically two types of investment products: i) non-finanacial and ii) financial assets.

Non-financial assets are the most preferred among most of the people. Real estate and gold investments are few examples of non-financial assets. On the other hand, financial assets are further divided into a) fixed income products and b) market-linked products. here, bank fixed deposit and Public Provident Fund are fixed income products; whereas, mutual funds and stocks are market-linked products.

Here are the best investment avenues Indian people can look into in order to meet their financial goals:

RBI Taxable Bonds

The government has come up with 7.75% savings taxable bonds. This bond replaced the previous 8% savings taxable bonds 2003. As per the rule of RBI, the tenure of these bonds is 7 years. In general, the bond is issued by RBI in the format of demat and accredited to the BLA (Bond Ledger Account) of the consumer or the investor. Furthermore, a Certificate of Holding is provided to the consumer/investor as proof of the investment.

Senior Citizen Savings Scheme (SCSS)

Those who are looking forward to create a substantial financial corpus for their retirement, often choose to take up this option. As the name indicates, only senior citizen can open and invest in this scheme. Those who are above 60 can avail the benefit of this scheme.

They can either avail this saving scheme from post office or public banks. The tenure of this scheme is 5 years. Once it matures it can further be extended to 3 more years. In the present scenario, the interest rate of this scheme is 8.3% per year. This is fully taxable and quarterly payable. One person can open only one account and the maximum investment limit is 1.5 lakhs.

Public Provident fund (PPF)

PPF is still one of the most popular investment options across the country. there is a huge lot of people who still prefer to invest the money in this fund. The tenure of the scheme is 15 years. This is a tax saving investments avenue and the interest rate offered is also reasonable.

Bank Fixed Deposit

In India, fixed deposit is still considered as the safest investment choice among people. According to the rules of the Credit Guarantee Corporation and Deposit Insurance, each depositor has insured up to Rs 1 lakh for both principal and interest. One can easily choose for either yearly, half yearly, quarterly or monthly interest option.

Final Thoughts

Going through the aforementioned facts, it would be easier for you to relate to what is investment and how it brings hopes of gaining higher amount to the investors. These investment options are inferred as the best investment options among the common folks of the country. However, it’s always advisable to consult with financial advisors before going ahead with any investment plan as proper guidance and advice can lead one investor to right path of investment.

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Appl

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).