Even if you do not have any investment experience, you can become an investor using, for example, investment funds in which various risks are diversified- you just have to choose a manager and plans.
Making investment in bonds India may well become a profitable alternative to saving money under a mattress or simply in a checking account. This is a long-term endeavor, as over several months or years, price fluctuations can be too large to be considered a solid profit.
Don’t panic if the value of your investment decreases. It is best to take a wait-and-see attitude – it is quite possible that after a while prices will begin to rise again and you will make up for the lost.
If you see that more and more money is accumulating on your account, it may be time to look at some more profitable alternative, for example, investing in the securities market.
However, in order to make a responsible investment decision, you first need to learn about several important principles.
Benefit And Risk Go Hand In Hand
If we analyze the results of investments since 1802, then the highest level of income was shown by shares; followed by bonds. However, the golden rule of investing is that the ability to make higher returns goes hand in hand with higher levels of risk.
If someone offers a significantly higher percentage of potential return than others, then most likely the investor will have to take on a greater risk.
In practice, this means that in case of favorable conditions, you can really hope for an impressive profit, but there is also a relatively high probability of a bad scenario, which means that the value of your money will fall.
Therefore, you should always carefully assess your risk appetite: how much risk you are willing to take in order to remain comfortable enough.
In addition, you need to remember about the cyclical nature of price fluctuations- until you sell your stocks or bonds, you still have the opportunity to make money from them in the long term, even if you fail in the short term.
A Few Words About Stocks And Bonds
Shares are issued by enterprises, and by purchasing them, you become a co-owner of a particular company.
It is necessary to take into account that all enterprises do not promise to pay dividends, and fluctuations in stock prices in the short term can be impressive- the price changes several times a day, therefore, in order to hope for a solid profit, you need to invest in stocks for a long time.
In turn, bonds are securities that are issued by governments, municipalities and various organizations: buying them, you become a lender and your investment bonds tax return will be formed by the interest from this loan.
Simply put, during an economic downturn, the value of bonds rises and, conversely, decreases when the economy is uphill.
A bond is a debt instrument. By purchasing it, you lend money to the issuer. Such an issuer can be a state or a separate company (corporation), therefore bonds are government (treasury) and corporate.
Liquidity is an indicator that shows how often this bond is bought and sold. Are there many transactions in the market with this security? If so, then it is enough to just buy or sell it. The higher the liquidity, the better for you as an investor.