For a good businessman, who has perfect skills for running a business, it is always better to make investments in his own business. Stock markets allow us to be the owners or part-owners of a business. Thus we can enjoy the benefits of being owners. But we do not have to face the difficulties and challenges that management goes through.
The gist is that you can do two significant things with your money. You can either try to make it grow, or you can try to keep it safe. It is necessary to store it wisely. People commit common mistakes while storing their money. Sometimes, because of carelessness or foolishness, people may store it in such a way that the money loses its value due to inflation. It may also happen that the money does not lose its value, but it does not grow either.
Now, if you are wondering what we mean by storage of money, then let us tell you that the storage of money means all kinds of deposits. These deposits may range from your bank deposits, post office deposits to the Government deposits like Public Provident Funds, or National Savings Certificates.
Also, you can simply hold money in the form of cash. But it has some shortcomings of its own. Also, it is useless to keep excessive amounts of cash.
All these are valid options for storing money only if you will be needing the amount shortly. In such cases, you can opt for low risk and stable instrument.
If you do not need your money back soon, then it is always better to try hard and increase the amount of your money. And we are very clear with the idea that investing your money for growth purpose means making investments in equity funds. You have a lot of options here. For instance, you can invest in equity-based mutual funds, buy shares, etc. But if you are a beginner, then it is better to invest in equity funds. It will enable you to acquire a return that is capable of beating inflation in the long run.
To be able to understand this, you need to be well acquainted with the source of equity profits. The average economic growth is the ultimate source of equity profits. Generally, equity stays unaffected by inflation. This is so because the inflation rate is a part of the economic growth.
Let us make you understand by giving you an example. It the economic growth rate is 5%, and the rate of inflation is 5%, then stocks will be at least 10%.
This is just an average that we have shown you. If being an investor, you can select stocks that are above average; then, you will be able to beat the economic growth rate, that too, by a large margin.
Let's talk about fixed-income investments. It has links with the inflation rate of the economy. Always keep in mind that these types of gains and accomplishments are mean and average, which all the equity is capable of delivering. You will find a wide variety in the period and individual investments.
Not to forget that to achieve the gains, it is necessary to hold on for at least three years. If possible, you can hold on for even longer. But the one undeniably true thing is that to increase your money, you will not be able to ignore the lucrative option of equity-based investments.