Well, the short-term and
long-term financial investment options available for Indian investors.
MUTUAL FUNDS
SIP
BONDS
GOVERNMENT SECURITIES
PRIVATE SECURITY
BANK FIXED DEPOSIT (FD)
REAL ESTATE
GOLD
EQUITY OR DIRECT EQUITY (STOCK MARKET)
NATIONAL PENSION SYSTEM (NPS)
PUBLIC PROVIDENT FUND (PPF)
ULIP
ETF
POST OFFICE SCHEMES
MUTUAL FUNDS
A mutual fund is a
professionally-managed investment scheme, usually run by an asset management
company that brings together a group of people and invests their money in
stocks, bonds and other securities. Mutual funds, particularly equity mutual
funds, are believed to be the best investment avenue in India currently.
As an investor, you can buy
mutual fund 'units', which basically represent your share of holdings in a
particular scheme. These units can be purchased or redeemed as needed at the
fund's current net asset value (NAV). These NAVs keep fluctuating, according to
the fund's holdings. So, each investor participates proportionally in the gain
or loss of the fund.
The biggest advantage of
investing through a mutual fund is that it gives small investors access to
professionally-managed, diversified portfolios of equities, bonds and other
securities, which would be quite difficult to create with a small amount of
capital.
SIP:
Systematic Investment Plan is an
investment strategy wherein an investor needs to invest the same amount of
money in a particular mutual fund at every stipulated time period.
Investing in SIP enables an
investor to take part in the stock markets without actively timing them and
he/she can benefit by buying more units when the price falls and less units
when the price rises. This scheme helps reduce the average cost per unit of
investment through a method called Rupee Cost Averaging.
BONDS:
A bond is a debt instrument in
which an investor loans money to an entity (typically corporate or government)
which borrows the funds for a defined period of time at a variable or fixed
interest rate. Bonds are used by companies, municipalities, states and
sovereign governments to raise money to finance a variety of projects and
activities. Owners of bonds are debt holders, or creditors, of the issuer.
GOVERNMENT SECURITIES:
A Government Security (G-Sec) is
a tradeable instrument issued by the Central Government or the State
Governments. It acknowledges the Government’s debt obligation. Such securities
are short term (usually called treasury bills, with original maturities of less
than one year) or long term (usually called Government bonds or dated
securities with original maturity of one year or more).
In India, the Central Government
issues both, treasury bills and bonds or dated securities while the State
Governments issue only bonds or dated securities, which are called the State
Development Loans (SDLs). G-Secs carry practically no risk of default and,
hence, are called risk-free gilt-edged instruments.
PRIVATE SECURITY:
Private securities can be any
type of investment, including publicly traded stocks, bonds or funds to
non-public investments offered by private parties.
BANK FIXED DEPOSIT (FD):
A fixed deposit (FD) is a
financial instrument provided by banks or NBFCs which provides investors a
higher rate of interest than a regular savings account, until the given
maturity date.
REAL ESTATE:
Real estate is property made up
of land as well as anything on it, including buildings and natural resources.
REIT or Real Estate Investment
Trust refers to an entity created with the sole purpose of channelling
investible funds into operating, owning or financing income-producing real
estate. REITs are modelled on the lines of mutual funds and provide investors
with an extremely liquid way to get a stake in real estate. It is a type of
security that provides all types of investors, big or small, an outlet for
regular income, portfolio diversification, and long-term capital appreciation.
Like any other security, REITs can enlist themselves on a stock exchange.
REITs have many advantages for
interested investors. It provides a regular income stream along with reduced
portfolio volatility and dividends and wealth accumulation. As a result of it
being a listed entity, it is bought and sold with ease providing great
liquidity. It is a natural hedge against inflation as returns have been seen to
consistently outpace Consumer Price Inflation.
There are primarily two types of
REITs – equity and mortgage. Real Estate Investment Trusts are extremely
beneficial for the development of an economy as they allow dormant investable
funds to be channelled into infrastructure projects such as apartment
complexes, hospitals, schools and the likes.
GOLD:
Here are four ways you can invest.
- Gold Bullion. Buy physical gold at various prices: coins, bars and jewelry.
- Gold ETFs. Gold exchange-traded funds are a popular way to have gold exposure in your portfolio without the hassle of storing the physical metal.
- Gold ETN
- Gold fund: As the name suggests, invests in various forms of gold. It can be in the form of physical gold or stocks of gold mining companies.
EQUITY OR DIRECT EQUITY (STOCK MARKET):
In equities, the shares are
expressed in terms of face value, issue price, market value, etc. If you invest
in equities, you have high chances of making a return which is twice or thrice
as high as your capital. But at the same time, the risk factor associated to
equities is high as well.
PUBLIC PROVIDENT FUND (PPF):
The National Pension System (NPS) is a long term
retirement - focused investment product managed by the Pension Fund Regulatory
and Development Authority (PFRDA). The minimum annual (April-March)
contribution for an NPS Tier-1 account to remain active has been reduced from
Rs 6,000 to Rs 1,000. It is a mix of equity, fixed deposits, corporate bonds,
liquid funds and government funds, among others. Based on your risk appetite,
you can decide how much of your money can be invested in.
ULIP:
ULIP is a financial instrument
which facilitates investments in equities and bonds while offering protection
at the same time. It’s an integrated plan in which one portion of the
investments are apportioned towards stocks and bonds as chosen by the
individual and the remaining is maintained as a life insurance cover.
ETF
ETF's launched on NSE. Exchange Traded
Funds are essentially Index Funds that are listed and traded on exchanges like
stocks. An ETF is a basket of stocks that reflects the composition of an Index,
like Nifty 50. The ETFs trading value is based on the net asset value of the
underlying stocks that it represents.
POST OFFICE SCHEMES:
If you are looking for an
investment avenue with short locking period, then post office schemes are the
best option to go for. The monthly income scheme of the Indian postal service is
considered one of the safest options to park your funds as it offers higher
returns without any form of risk. It offers returns in the form of fixed
monthly income,
Hope this article has added
something new to your knowledge base. This article is only for information
purpose. You have to decide what's best for you based on your requirement and
risk appetite. But the best return is with equity only.
Things to remember for investing
is:
- Invest periodically on regular intervals
- Start investing as soon as possible invest 500/- but do start investing
- Invest in schemes which provides you tax exemption & higher rate than inflation.
- Spread your risk with diversification like take some Government security, government bonds, f.d. etc these are safe return as government will pay you although return is low. Have small investment in mutual funds, SIP, equity & land if possible.
- Set a target value for your investment don't be greedy you can reinvest your profit amount but booking profit is important.
- Never exit in hurry think well if your desired profit ia not there.
- Always have emergency backup so you don't have to be dependent on investment amount getting liquid.
For most of the investment
purpose you will need a demat account. Now what is that?
A demat account holds all the
shares that you purchase in electronic or dematerialized form. Like the bank
account, a demat account holds the certificates of your financial instruments
like shares, bonds, government securities, mutual funds and exchange traded
funds (ETFs).
If you need demat account you can
have it with Zerodha Broking with lowest brokerage and access for Mutual Funds
Investment directly on lowest commission. You can register your details on this link and they will
call you back for guidance Open an online trading and demat account with Zerodha and
enjoy the lowest brokerage .