Welcome to your Journey of Creating Wealth
The key to achieving your wealth creation goals is to empower yourself with the right knowledge and its use. Creating wealth for the long-term can be simple when an expert holds your hand through the process.
Given your life stage, your life’s and financial goals may vary. From higher education to a wedding, child’s expenses to retirement, planning investments for each stage is important.
A common question that often arises is Where do I invest money?
NSE is happy to guide in you in the journey of investing safely. We are here to answer queries related to making the most of the financial market. Our aim is to empower you with knowledge so that you too can become a confident investor.
Ideally, a major portion of your income should go towards savings. The money you earn is partly spent and the rest saved for meeting future expenses. But these savings are not idle and can actually make money for you. Nowadays, one has multiple ways of investing in some of the best investment options and plans available in the market. Investment plans are a way to park your savings so that they may give you financial gains in the future.
Why should you invest?
Investing is a sure way to let your money grow and reap returns over time. Apart from this reason, let’s explore various reasons why you should look at more investment avenues:
- Your otherwise idle funds can reap returns for you.
- You can invest in different products to fulfil a future life goal.
- They are a provision to secure an uncertain future.
Inflation is another important reason to secure your financial future. Inflation causes money to lose value. Inflation is the rate at which cost of living rises making it expensive to buy goods and services to meet your daily needs. This is because with inflation, a value of 100 rupees today will not buy the same amount of a goods or a service in the future, as it does currently, or as it did in the past.
Imagine the following scenario:
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Inflation Rate Per Year |
Year |
Amount |
|---|---|---|
|
6% |
2018 |
Rs 100 |
|
6% |
2038 | Rs 321* |
*FV=PV (1+i)n
If we consider a 6% inflation rate per year for the next 20 years, what Rs 100 can buy in 2018 will cost Rs 321 in 2038. This is why it is important to consider inflation while planning long-term investment.
Furthermore, an investment’s ‘real’ rate of return, the return after inflation, must be considered. The return on investments should be above the inflation rate to ensure that the investment does not decrease in value. That is why it is important to first explore the best investment options available for you.
When should you start investing?
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The three golden rules for all investors are:
Creating wealth, and getting returns on investment, takes time and patience. Ideally, start investing as young as possible. But it’s also never late to begin this journey. By investing early, you give your investments a lot of time to bear fruit. The power of compounding works in the favour of long-term funds and grows them. This happens when the principal is accumulated, and interest and/or dividend is earned on it, year after year. |
What care should you take while investing?
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Investing money in the right plans can get tricky. We have defined 12 important factors that you should consider before investing:
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What are the best investment options available to you?
There is some kind of investment plan for everyone. Today, there are various types of investment options that answer the question, “Where should I invest my money?” You may invest in:
- Physical assets such as real estate, gold or jewellery, commodities, etc.
- Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance, provident or pension funds, instruments in the securities market such as shares, bonds, debentures, mutual funds, etc.
Investment Options
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Short-term Investments |
Long-term Investment |
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|---|---|---|---|
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Let’s break down each of the above types of investments and note their pros and cons.
Gold
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Opportunity |
Risk |
|---|---|
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In India, “buy gold” is often advised when investment options are discussed. Investment in physical gold is the easiest form of parking your savings. Conventional wisdom says that over the long term, gold as an investment does appreciate and give higher returns. Furthermore, gold can be converted into jewellery for personal use and be easily mortgaged for loans, if the need may arise. |
Gold prices depend on macro-economic factors. There is a possibility of encountering less transparency in terms of its quality while buying and selling physical gold. Gold carries high risk of theft; storing and maintaining it may also be expensive. There is no tax advantage on gold investment. Moreover no regular income can be earned with gold. |
Real estate
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Opportunity |
Risk |
|---|---|
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As one of the three necessities of life, there is low instability with investment in property. The market price of a property increases gradually making it a steady choice of investment. Its value can be increased through renovation and repairs. Mortgaging property is easy and it can generate regular income through rent. Income tax benefit <to check > |
You may need to invest a large amount of your savings to purchase a property. The transaction cost is high on account of stamp duty and registration charges. The cost of maintaining a property is high. If an emergency were to arise, it may be difficult to sell a property immediately. |
Fixed deposit
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Opportunity |
Risk |
|---|---|
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Fixed deposit interest rates are predetermined. Fixed deposits can be locked for specified periods of time to ensure that your money is safeguarded and you gain reasonable returns. They can be easily converted to savings. |
While fixed deposits guarantee returns, the amount they yield is usually lower than other short-term investments. You may be charged if you withdraw your fixed deposit before it matures or you may get a lower fixed deposit interest rate on the amount. Fixed deposit interest is taxable. |
Stock market
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Opportunity |
Risk |
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Investment in a stock market can yield relatively higher returns; it is also highly liquid. You can begin with as little as Rs 1000. Your money is handled by professional fund managers who are well versed with share market investment avenues. You can enjoy efficient post tax returns on investment. Tax is exempt for long-term capital gains over one year. |
Short-term investment in the share market is highly risky as there is a high volatility. It may be difficult to pick the right stocks.
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What is a stock or share market?
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A stock market is a public market where a company’s stock is traded among investors who want to buy and sell it. The goal of a share market is to facilitate the exchange of securities between buyers and sellers (at a mutually acceptable price) and reduce the risks of investing. The stock market, or equity, enables investors to increase their income without the high risk of entering a business that usually comes with high overheads and start-up costs. In a stock market, shares of companies that are publicly owned can be bought and sold on stock exchanges. Most public companies make use of their local stock exchanges as a platform to publicly list their company for capital gains. Trading in a stock market can be a win-win for companies that want to raise capital and for investors, who want to increase their income without taking resource-intensive risks. Let’s explore the two types of stock markets that exist in India. The primary market is where securities are initially created. This is an open stock market where a company’s shares are offered and sold for the first time. The company issuing the shares directly sells them here. Precedence as a primary listed company lends credibility to a company thus opening doors to investors who may be interested in investing. The primary market is dominated by the large investment institutes such as investment banks, hedge funds, etc. Selling and buying of shares that are already owned by investors is the typical idea of this market. In the secondary market, investors trade in stocks themselves. Furthermore, the company previously selling the stock is not a direct participant in the transaction. Note that stocks of a company are also sold on the primary market as that is where they are initially issued from. |
What do shares mean?
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Shares may be issued by a company to raise money for future projects or if one of its owners has chosen to dilute their stake in the company. These shares are purchased by investors who believe they can reap future profit that the company may make. Profit can be made in the form of dividends or capital gain when the stock price of the share increases and the investor sells. Let’s use an example to help you understand how shares work. Ajay is the founder of Ajay Textiles, a garment business in Mumbai, India. He has established his business and has a steady clientele. But to grow across India, he needs Rs 1 crore of capital.Ajay narrowed down to two options to raise these funds: borrow money from a bank at a high interest rate or raise it from friends and family. He finally goes for the latter option. He convinces his closest friends, Mahesh, Rahul and Vikas, to invest, after presenting a detailed business plan to them. They find it a great business opportunity and agreed to invest Rs 50 lakhs, Rs 30 lakhs, and Rs 20 lakhs, respectively. However, he didn’t want to cause a strain on his relationships and so, he came up with a plan. He decided that each person would be made partner in the business based on the amount they contributed. He made them shareholders of his company. Thus, Ajay raised interest-free capital and his friends got a share of ownership. A few months later, Mahesh urgently needed his share of the investment back because he has a personal emergency. But because Ajay’s business expansion plans were still in motion, he was not in a position to repay Mahesh. During this period, another friend of Ajay’s, Ramesh, had taken keen interest in his business. He offered to buy out Mahesh’s share for Rs 55 lakh. Mahesh readily agreed to the offer; so the three shareholders in Ajay’s company were Ramesh, Rahul, and Vikas. Ajay expanded his business and shared profits with his shareholders. His plan created a win-win situation for everyone involved. Ajay, the owner of the business, did not need to pay back the money or make interest payments along the way. The other partners eventually had hope to believe that the shares they bought would someday be worth more than what they had paid for them. The above example relates to how stock markets actually work. But you may wonder that if investments in the stock market are so fruitful, why don’t we all simply invest in stocks? The truth is that there is no guarantee of returns in the stock market. Some listed companies may declare dividends while others may not. There is no obligation on the part of the company to pay out dividends. You can profit from a stock when the price appreciates, but if the company goes bankrupt, your stock may be worth nothing. The motto for investing in the stock market remains: the higher the risk, the higher the return on investment. |
Step 1:- For becoming a capital market investor
- The first requirement is a PAN Card. This is mandatory for all investors.
- The other requirements are a bank account and a demat account. The demat account is normally linked to a bank account in order to facilitate paying in and out of funds and securities.
- The next step is to select a SEBI Registered broker and fill a KYC form and enter into a broker-client agreement.
- The broker then allocates a unique client ID, which acts as the identification.
- You are now ready to buy/sell securities.
Step 2:- For purchasing investment products
- Brokers: Brokers offer several services like purchase/sale of equity, debt and derivative products, mutual fund units, IPOs etc.
- Banks : Many banks offer facilities for purchase/sale of equity, debt and derivative products, mutual fund units, IPOs etc. physically as well as through their websites
- Mutual Funds: Almost all Mutual Funds facilitate online and physical buying/selling of mutual funds.
- Stock Exchanges: Close ended mutual funds are traded on stock exchanges and can be brought through brokers. Open ended mutual funds can also be bought/sold on the stock exchange platform.
Updated on: 16/02/2026
