INESTMENT AND MUTUAL FUNDS

What is investment? Be it an individual or a company – the principle is the same. Investing is nothing but spending your money tomorrow! At a future date to correctly say so.

A question we may ask – why invest at all when one can spend it today. Yes a valid one – We should spend money today – unless we do so any country’s economy can not grow – but how much we spend and how much we invest is a crucial question.

It is within human nature – in fact – many animal’s too – to try do safeguard our future. This habit has come to human beings right from the ancient days of cave dwelling. In the modern ages this has become a highly sophisticated machinery of human intelligence and most of all PATIENCE.

We need to invest:

To compete against the ever rising inflation – Nations talk all through the year about containing inflation – which is virtually impossible – after all the main content of any inflation statistics is wages and wages keep on raising every year but not enough to combat inflation. So we need to keep the value of our money at least to the level of inflation.

To keep our future needs fulfilled – Remember today is the day to spend but there will be a tomorrow – we need money to spend then too. Future needs may include anything – from your children’s studies/marriages to your own house car or a holiday trip abroad – you name anything.

To plan a happy retired life.

But where do we invest? After all there should be some other person willing to accept your money and give in return the expected higher rate return. Where does he invest unless he finds such some other person. It is big cycle which eventually depends on two factors:

A strong nation which has a very good manufacturing capacity (both agricultural and industrial products) – Singapore is an exception.

Uncertainty – any investment be it short or long term is uncertain in nature – however strong your economy is – But this very uncertain nature of investment make them work because we do not know certainly when that uncertainty would come – Both the investor and borrower have different evaluation of the consequences of the various uncertain outcomes and hence come to a mutually acceptable rate of return to make both happy!

Here MUTUAL FUNDS have a strong play – A mutual fund is nothing but a pooling together of hundreds or thousands of individual investments and their fund size is so enormous that they can demand literally any price they want. There are many funds that invest in Equity market, Fixed Income market, or mixture of these two. The list is endless.

IF YOU ARE NOT SURE OF INVESTING DIRECTLY IN EQUITY MARKET ON YOUR OWN THEN MUTUAL FUNDS ARE THE BEST BET BECAUSE OF THEIR SIZE AND THE ABILITY TO READ THE MARKET.

Disclaimer: The above write-up is to enlighten the importance of investment in our daily life – this is not invitation to invest in mutual fund or equity market.

Investing in equity or mutual fund is a subject matter of market risk and to be done carefully after studying the pros and cons.