Finance refers to the process of collecting funds and to invest those funds in the most profitable manner. Some of the basic principles of finance are:
1. Risk And Return: An investor while making an investment has to pay attention towards both risk and return with the objective of maximizing return and minimizing risk.
2. Time value of money: the value of money is decreased when the time passes. the vaue of Rs.1 today will be less tommorrow because of inflation.
3. Diversity: diversity means that you should never keep all your eggs in one basket but should keep in different baskets to minimize risk.
4. Liquidity: this means how easy is it to convert your investment into cash. An investor should always keep some liquid investments for difficult times.
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