”What“-  The money we earn is spent partly and the rest of it is saved for meeting future needs. Instead of keeping the savings idle we can use savings, so that it value increases slowly in course of time. This is called Investment. One of the important reasons “why” one needs to invest is to meet the cost of inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Cost of living increases or a high inflation rate means you won’t get same amount of goods in future as it is buying today. Which means money lost its value in a course of time.For example from January 2008 – January 2009 prices increased 6% therefore something that cost $10 in January 2008 would cost $10+ (inflation rate) in January 2009. So in this case it would be $10+($10 * .06)= $10.6 .This is why one should consider inflation as a factor in any long-term investment strategy.So the ultimate aim of investment is to earn returns above the inflation rates. Otherwise we can’t say the value of investment increased. Take the previous example itself, here the investment need to earn more than 6% to ensure it increases in value.If the after-tax return on your investment is less than the inflation rate, then your assets have actually decreased in value.Now the third “W”–this is a crucial question and cannot be answered precisely, but still we can say the sooner you start the better.Because that will give your investment more time to grow, or we will get interest on accumulated money year after year.So we need to invest early, regularly and invest for long terms.”Interest” will be our interest in investing our assets.To understand the term just think about we calling a cab service, we are paying the cab driver for using it for travelling, similarly the borrower of our money will pay us a sum for using our money.i.e Interest is an amount charged to the borrower for the privilege of using the lender’s money.This is usually calculated as a percentage of principal(the amount borrowed).This is termed as interest rate.The factors which govern these interest rates are mostly economy related, which are mainly demand for /supply of money, inflation rate, level of government borrowings etc.With a few investment options i will finish the writing.Mainly one can invest in physical assets and financial assets.A physical asset can a piece of land, gold, commodities etc.Whereas a financial asset is something like a fixed deposit with banks, a post office savings account, insurance/provident funds, shares, bonds etc

                      Financial assets investment can be done in different ways, short term investments, long-term investments. Savings bank accounts, Fixed deposits, Money market or Liquid funds are all short- term investments.Long-term investments include bonds, shares, post office savings, public provident funds, company fixed deposits etc

Related posts:

1. PPF-A Long Term Investment Scheme
2. “Mutual Funds” Know How
3. Awareness on “80 c” of Income Tax Act
4. What is Inflation?
5. ELSS-Equity Linked Savings Scheme