The money you earn is partly spent and the rest saved, for meeting the future expenses. If you keep your savings idle its nominal value remains the same but real value decreases by prevailing inflation. This can be defined by the following formula:
Real rate of return = Nominal rate of return - Inflation
Instead of keeping the savings idle, you park it somewhere to get a return on this capital in the future. This is called an investment.
There are various avenues for investment. You may invest in the bank deposits, postal deposits, real estate, jewelry, paintings, life insurance, tax savings schemes likes PPF/NSC or stock market related instruments called securities like shares, debentures, bonds, etc.
However, the return from each investment option depends on the associated risk. The riskier the investment, the higher will be the return. For instance, stock market related investments are risky, but makes you earn more returns than other modes of investment.
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