Why Investments are Important?

Investments are both important and useful in the context of present day conditions. Some factors that have made investment decisions increasingly important are:

• Longer life expectancy or planning for retirement
• Increasing rate of taxation
• High interest rates high rate of inflation
• Larger incomes
• Availability of a complex number of investment outlets
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What is longer life expectancy?

Investment decisions have become significant as most people retire between the age of 55 and 60. Also, the trend shows longer life expectancy. The earnings from employment should, therefore be calculated in such a manner that apportion should be put away as savings. Savings by themselves do not increase wealth; these must be invested in such a way that the principal and income will be adequate for greater number of retirement years. This is especially applicable to the countries like India.

The importance of investment decision is further enhanced by the fact that there is an increasing number of women working in organizations. These women will be responsible for planning their own investments during their working life so that after retirement they are able to have a stable life.

Increasing Rates of Taxation:

Taxation is one o f crucial factors in any country which introduces an element of compulsion in a person’s savings. There are various forms f savings outlets in our country in the form of investments which help in bringing down the tax level by offering deductions in personal income.

Interest Rates:

Another advantage of investments is the level of interest rates. Interest rate is varying between one investment and another. These may vary between risky and safe investments. A high rate of the interest is not only the factor favoring the outlet of the investment. The investor has to include in his portfolio several kinds of investments. Stability of interest is as important as receiving a high rate of interest.


Inflation


Inflation has become a continuous problem in developing countries. In these years of rising prices, several problems are associated coupled with a falling standard of living.
Before funds are invested, erosion of the resources will have to be carefully considered in order to make the right choice of investments. The investor will try and search an outlet which will give him a high rate of return in the form of interest to cover any decrease due to inflation. He will also have to judge whether the interest or return will be continuous or there is a likelihood of irregularity.

Income:

Another reason why investment decisions have assumed importance is the general increase in employment opportunities in the countries like India.
The employment opportunities gave rise to both male and female working force. More incomes and more avenues of investment have led to the ability and willingness of working people to save and invest their funds.

Investment channels:

The growth and development of the country leading to greater economic activity has led to the introduction of a vast array of investment outlets. Apart from putting aside savings in savings banks where interest is low, investors are the choice of a variety of instruments.