INTRODUCTION

An investment is an asset or item acquired with the goal of generating income or appreciation.
Appreciation refers to an increase in the value of an asset over time. When an individual
purchases a good as an investment, the intent is not to consume the good but rather to use it in
the future to create wealth.

An investment always concerns the outlay of some resource today time, effort, money, or an
assetin hopes of a greater payoff in the future than what was originally put in. For example, an
investor may purchase a monetary asset now with the idea that the asset will provide income in
the future or will later be sold at a higher price for a profit.

How an Investment Works

The act of investing has the goal of generating income and increasing value over time. An
investment can refer to any mechanism used for generating future income. This includes the
purchase of bonds, stocks, or real estate property, among other examples. Additionally,
purchasing a property that can be used to produce goods can be considered an investment.

In general, any action that is taken in the hopes of raising future revenue can also be considered
an investment. For example, when choosing to pursue additional education, the goal is often to
increase knowledge and improve skills. The upfront investment of time attending class and
money to pay for tuition will hopefullyresult in increased earnings over the student's career.
Because investing is oriented toward the potential for future growth or income, there is always a
certain level of risk associated with an investment. An investment may not generate any income,
or may actually lose value over time. For example, a company you invest in may go bankrupt.
Alternatively, the degree you investing time and money to obtain may not result in a strong job
market in that field.

An investment bank provides a variety of services to individuals and businesses, including many
services that are designed to assist individuals and businesses in the process of increasing their
wealth. Investment banking may also refer to a specific division of banking related to the
creation of capital for other companies, go vernments, and other entities. Investment
banks underwrite new debt and equity securities for all types of corporations, aid in the sale
of securities, and help to facilitate mergers and acquisitions.

Types of Investments

There's arguably endless opportunities to invest; after all, upgrading the tires on your vehicle
could be seen as an investment that enhances the usefulness and future value of the asset. Below
are common types of investments in which people use to appreciate their capital.

Stocks/Equities

A share of stock is a piece of ownership of a public or private company. By owning stock, the
investor may be entitled to dividend distributions generated from the net profit of the company.
As the company becomes more successful and other investors seek to buy that company's stock,
it's value can also appreciate and be sold for capital gains.

The two primary types of stocks to invest in are common stock and preferred stock. Common
stock often includes voting right and participation eligibility in certain matters. Preferred stock
often have first claim to dividends and must be paid before common shareholders.

In addition, stocks are often classified as being either growth or value investments. Investments
in growth stocks is the strategy of investing in a company while it is small and before it achieves
market success. Investment value stocks is the strategy of investing a more established

company whose stock price may not appropriate value the company.
Bonds/Fixed-Income Securities

A bond is an investment that often demands an upfront investment, then pays a reoccurring
amount over the life of the bond. Then, when the bond matures, the investor receives the capital
invested into the bond back. Similar to debt, bond investments are a mechanism for certain
entities to raise money. Many government entities and companies issue bonds; then, investors
can contribute capital to earn a yield.

The recurring payment awarded to bondholders is called a coupon payment. Because the coupon
payment on a bond investment is usually fixed, the price of a bond will often fluctuate to change

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the bond's yield. For example, a bond paying 5% will become cheaper to buy if there are market
opportunities to earn 6%; by falling in price, the bond will naturally earn a higher yield.
Index Funds and Mutual Funds

Instead of selecting each individual company to invest in, index funds, mutual funds, and other
types of funds often aggregate specific investments to craft one investment vehicle. For example,
an investor can buy shares of a single mutual fund that holds ownership of small cap, emerging
market companies instead of having to research and select each company on its own.

Mutual funds are actively managed by a fim, while index funds are often passively-managed.
This means that the investment professionals overseeing the mutual fund is trying to beat a
specific benchmark, while index funds often attempt to simply copy or imitate a benchmark. For
this reason, mutual funds may be a more expense fund to invest in compared to more passive
style funds.

Real Estate

Real estate investments are often broadly defined as investments in physical, tangible spaces that
can be utilized. Land can be built on, office buildings can be occupied, warehouses can store
inventory, and residential properties can house families. Real estate investments may encompass
acquiring sites, developing sites for specific uses, or purchasing ready-to -occupy operating sites.
In some contexts, real estate may broadly encompass certain types of investments that may yield
commodities. For example, an investor can invest in farmland; in addition to reaping the reward
of land value appreciation, the investment carns a return based on the crop yield and operating
income.

Commodities

Commodities are often raw materials such as agriculture, energy, or metals. Investors can choose
to invest in actual tangible commodities (i.e. owning a bar of gold) or can choose alternative
investment products that represent digital ownership (i.e. a gold ETF).

Commodities can be an investment because they are often used as inputs to society. Consider oil.
gas, or other forms of energy. During periods of economic growth, companies often have greater

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energy needs to ship more products or manufacture additional goods. In addition, consumers
may have greater demand for energy due to travel. In this example, the price of commodities
fluctuates and may yield a pro fit for an investor.
Cryptocurrency

Cryptocurrency is a blockchain-based currency used to transact or hold digital value.

Cryptocurrency companies can issue coins or tokens that may appreciate in value. These tokens
can be used to transact with or pay fees to transact using specific networks.

In addition to capital appreciation, cryptocurrency can be staked on a blockchain. This means

that when investors agree to lock their tokens on a network to help validate transactions, these
investors will be rewarded with additional tokens. In addition, cryptocurency has given rise to
decentralized finance, a digital branch of finance that enables users to loan, leverage, or
alternatively utilize currency.
Collectibles

A less traditional form of investing, collecting or purchasing collectibles involves acquiring rare
items in anticipation of those items becoming in higher demand. Ranging from sports
memorabilia to comic books, these physical items often require substantial physical preservation
especially considering that older items usually carry higher value.

The concept behind collectibles is no different than other forms of investing such as equities.
Both predict that the popularity of something will increase in the future. For example, a current
artist may not be popular but changes in global trends, styles, and market interest. However, their
art may become more valuable in time should the general population take a stronger interest in
their work.

Investments and Risk

In its simplest form, investment return and risk should have a positive correlation. If an
investment carries high risk, it should be accompanied by higher returns. If an investment is
safer, it will often have lower returns.

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When making investment decisions, investors must gauge their risk appetite. Every investor will
be different, as some may be willing to risk the loss of principle in exchange for the chance at
greater profits. Alternatively, extremely risk-averse investors seek only the safest vehicles where
their investment will only consistently (but slowly) grow.

Investments and risk are often strongly related to prevailing conditions in the investor's life. As
an investor approaches retirement, they will no longer have stable, ongoing income. For this
reason, people usually choose safer investments towards the end of their working career. On the
other hand, a young professional can often bear the burden of losing money as they have their
entire career to make that capital back. For this reason, younger investors are often more likely to
invest in riskier investments.

Investments and Diversification

One way investors can reduce portfolio risk is to have a broad range of what they are invested in.
By holding different products or securities, an investor may not lose as much money as they are
not fully exposed in any one way.

The concept of diversification was born from modern portfolio theory, the idea that holding both
equities and bonds will positively impact the risk-adjusted rate of return in a portfolio. The
argument is holding strictly equities may maximize returns but also maximizes volatility. Pairing
it with a more stable investment with lower returns will decrease the risk an investor incurs.

Investing vs. Speculation

Speculation is a distinct activity from investing. Investing involves the purchase of assets with
the intent of holding them for the long term, while speculation involves attempting to capitalize
on market inefficiencies for short-term profit. Ownership is generally not a goal of speculators,
while investors often look to build the number of assets their portfolios over time.

Although speculators are often making informed decisions, speculation cannot usually be
categorized as traditional investing. Speculation is generally considered a higher risk activity
than traditional investing (although this can vary depending on the type of investment involved).

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Some experts compare speculation to gambling. but the veracity of this analogy may be a matter
of personal opinion.

Investing vs. Saving

Saving is accumulating money for future use and entails no risk, whereas investment is the act of
leveraging money for a potential future gain and it entails some risk. Though both have the
intention of having more capital available in the future, cach go about growing in a very different
way.

One aspect this is most transparent is the process of saving for a down payment on a home.
Many advisors will suggest parking cash in a safer investment vehicle when saving for an
important major purchase. Because investing incurs a higher degree of risk, an individual must
compare what implications of loss of principle would be to their future plans.

Saving and investing are often intertwined because each may have a stated yield or rate of return.
Another primary difference is the federal insurance coverage on certain accounts.

Financial Planning

Financial Planning is the process of estimating the capital required and determining it's
competition. It is the process of framing financial policies in relation to procurement, investment
and administration of funds of an enterprise.

Tax Savings

As the famous saying goes A penny saved is a penny earned . Tax planning is one of the ways
which can help you save on taxes and increase your income. The income tax act provides
deductions for various investments, savings and expenditure incurred by the taxpayer in a
particular financial year. We willdiscuss some of the avenues further in this report which can
help you save taxes.

Tax Planning for Salaried Employees

Being an Indian taxpayer, you always understand that you need to pay 20-25% of taxes from
your income but we need to know that for salaried employees also some expenses allowed for
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deduction and exemption and allowances. It will help you figure out how tax saving for salaried
class works and avoid complications that may arise during tax planning. If you find the
appropriate financial instruments, you can reduce the payable income tax for salaried employees.
For the very first time in India , you will came to know that if you plan your expenses in such a
way that you make expenses on tax free structures, you can plan to zero tax for even salary upto
30 lacs.

Leave Travel Concession (LTC)

Leave Travel Concession is an exemption that salaried employees receive from their employer to
travel on leave. Some of them are:

The employees must go on an actual journey to get tax exemption.

Only domestic travel expenses are considered under LTC exemption.
The tax savings for salaried individuals apply on actual travel costs like bus or rail fare,
but not on miscellaneous expenses such as local sightseeing.

You should also know that LTC cannot be treated as a tax-free income every year u/s 10(5) of
the Income Tax Act. It is only allowed twice in block of 4 years.

Tax Rebate under Section 87A

Those having taxable income of up to Rs 5 lakh will not have to pay tax from FY 2019-20.

If you are earning anything above the exemption limits annually then you are mandatorily
required to file your ITR.

House Rent Allowance (HRA)

Individuals living in rented accommodation can avail tax benefits for salaried employees as per
the related rules. HRA or House Rent Allowance (HRA), a part of an employee's salary
structure, is not fully taxable, leading to income tax deductions for salaried employees.

The amount of exemption is least of the following.

a) Actual HRA Received

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b)40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)

c) Rent paid minus 10% of salary

(Salary- Basic + DA (if part of retirement benefit) + Turnover based Commission)

What makes HRA one of the tax saving options for salaried individuals is that a part of it is
exempted uws 10(13A) of the Income Tax Act, 1961, subject to certain clauses. The taxable
income is calculated after deducting HRA from the total income.

National Pension Scheme (NPS)

National Pension Scheme (NPS) is one of the long-ternm tax saving options for salaried people in
India. It is an investment plan that falls under the purview of PFRDA and the Central
Government. People who want to plan for early retirement and have low-risk appetite invest in
NPS. Besides, it also serves as a means for income tax deductions for salaried employees.

Tax benefits for salaried employees can be claimed under Section 80 CCD (|B) for Rs 50000
over and above Rs. 1.5 Lakh ceiling u/s 80CCE. In other words, it helps in income tax planning
for salaried employees.

Health Insurance Premium

Health insurance plan provides financial security to you and your loved ones in medical
emergencies or planned hospitalisation. Besides safeguarding your financial interests, health
insurance is one of the most used tax saving options for salaried people.

In general, the premiums paid towards health insurance are eligible for income tax deductions for
salaried employees, subject to the term of Section 80D. As a part of planning income tax for
salaried employees, you can benefit more from this provision by paying for health insurance of
your spouse, dependent children, and parents.

The maximum deduction you can avail u/s 80D is Rs. 1,00,000