Teach Your Self Finance And Investment Basics

When we borrow money, we are expected to pay for using it – this is known
as Interest. Interest is an amount charged to the borrower for the privilege
of using the lender’s money. Interest is usually calculated as a percentage of
the principal balance (the amount of money borrowed). The percentage rate
may be fixed for the life of the loan, or it may be variable, depending on the
terms of the loan.
What factors determine interest rates?
When we talk of interest rates, there are different types of interest rates -
rates that banks offer to their depositors, rates that they lend to their
borrowers, the rate at which the Government borrows in the
Bond/Government Securities market, rates offered to investors in small
savings schemes like NSC, PPF, rates at which companies issue fixed
deposits etc.
The factors which govern these interest rates are mostly economy related
and are commonly referred to as macroeconomic factors. Some of these
factors are:
Demand for money
Level of Government borrowings
Supply of money
Inflation rate
The Reserve Bank of India and the Government policies which
determine some of the variables mentioned above
What are various options available for investment?
One may invest in:
Physical assets like real estate, gold/jewellery, commodities etc.
and/or
Financial assets such as fixed deposits with banks, small saving
instruments with post offices, insurance/provident/pension fund etc.
or securities market related instruments like shares, bonds,
debentures etc.