Investment is just like gambling which includes many risks. Making the right investment is important to grow your money and reduce the risks. Therefore, before investing, you must educate yourself about the investment and its strategies so that you don’t end up with zero in your hand. A better understanding of the investment management process helps you to make most of your hard-earned money.
What is Investment
Investment is an asset that allows your money to grow to meet various objectives like income shortage, retirement security, loan repayments, etc. Investment generates income in two ways:
- If you invest in a sealable asset, you can gain profit.
- If you invent in return generating asset, you will get income through the accumulation of gains
In other words, investment is all about putting savings into an asset that grows and helps produce income. The investment management process helps you to invest smartly;
Types of Investments
There are broadly 2 types of investments –equity investments and debt instruments. Equity investments involve more risk but provide good profit while in Debt instruments, the profit is low risk and profit. The process of investment management helps to decide which types of investment you want to make.
There are a few different types of investments in India-
- Stocks – you can buy stocks of any company with makes you a part of its own and you can earn dividends in return.
- Bonds- Investing in bonds means lending your money to some financial institution and they give you fixed rates of interest.
- Mutual funds- In mutual funds, the funds are collected from many investors and invested in bonds or shares. These are managed by fund managers.
- ULIP- United Link Insurance Plans are the type of investment that provide insurance and investment benefits together. It also offers tax savings of up to Rs. 1.5 lakhs.
- PPF- PPF is a government saving scheme that invests your fund to a certain time and provides you return. It can provide you 1.8% interest rate on your invested money.
Deciding the type of investment your want to put your money in depends on your needs. Different investment types provide different benefits, you can choose the one that suits your financial goals.
What is the Investment Management Process?
The investment management process involves some rules and regulations that help investors and tenets to stay loyal to each other. The investment decision process helps you to solve the issues that you might face in your work performance by improving your work and making good decisions.
The financial advisors keep in touch with their clients and explain the investment process regularly to assess their financial situation.
Steps of the Investment Management Process
There 5 steps involved in process of investment management which help investors to gain insight into their financial conditions. The steps are:
1. Assess your current financial situation
2. Define your investment objectives
3. Allocate your Assets
4. Select an investment strategy
5. Monitor and Manage the investment process.
Investment Management Process- FAQs
Q1. How Process of investment management helps in a good investment decision?
Ans. The steps involved in the process of investment management help investors gain insight into their finances and help in identifying financial goals.
Q2. How many steps are there in the investment management process?
Ans. There are 5 steps- assessing a financial situation, defining investment objective, Allocating assets, selecting a strategy, and managing the investment process