A Complete Overview And Guide To Key Investment Methods

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Any action or operation undertaken for financial gains at any point in the future can be considered an investment and categorized in many ways. From a broad perspective, there are two categories of investments:

• Financial Investments: Financial assets or investments can be divided into market-linked instruments and fixed-income instruments. It is easy to invest in most financial assets using an online trading app.
• Non-Financial Investments: Among various non-financial assets, physical gold and real estate are the most popular ones.

Continue reading to know about different types of financial and non-financial assets preferred in India.

Overview and Guide to Key Investments in India

Investors prefer the following assets depending on their financial goals, risk appetite and financial profile:

Market Linked Investments

Market-linked assets can be defined as investment products that are underlined to market movement to provide returns. 

• Direct Equity

Equity investments are stock investments that can be traded in markets. Investments in equities require thorough research and prudence to identify the right picks. Investors need to monitor market movements continuously. Equities are known for high profile potential and are considered risky due to market volatility. To reduce risk, investors need to diversify their investments across companies or sectors or they can invest for the long term.

Investors can download a stock market/intraday trading app to trade securities online. Reputed discount brokers serve investors with their digital advisory services through Investpacks. These are ready-to-invest customized stock baskets making equity investing easy.

Why Invest in Equities: Investments in equities or stocks can provide an opportunity to earn inflation-adjusted returns and create wealth over a long period.

• Mutual Funds

Mutual funds (MFs) invest the pooled money in different market-linked and debt instruments. These are diversified and professionally-managed products against a fee. Numerous mutual fund schemes are available for different types of investors in India, including equity funds, debt funds, hybrid funds, etc., depending on their financial goals and risk profile. Investors with a high-risk appetite consider equity mutual funds. On the other hand, conservative investors prefer debt funds. Furthermore, investors can choose a Systematic Investment Plan (SIP) to invest in small periodically.

Why Invest in Mutual Funds: Mutual funds are preferred for the benefits of diversification, professional assistance and small investments.

Fixed Income Investments

Fixed-income assets are preferred for fixed returns. Once capital is invested, returns are assured at fixed, though low, as these investments do not get affected by market movements.

• Fixed Deposits

Numerous Indian investors with low-risk appetite prefer fixed deposits (FDs). Individuals who have a lump sum amount can open an FD account and lock the funds for a period between 7 days to 10 years or depending on the FD issuer’s terms and conditions. The risk-reward ratio is low for FD investments.

• Bonds

Bonds are one of the debt investments and are popular among conservative investors. Bond investors are the lenders to the bond issuer and in return, they earn interest at a preset coupon rate (interest rate) till the maturity date. After the maturity date, the investor receives the principal investment amount back. Bonds can be fixed-rate bonds, floating-rate bonds, zero-coupon bonds, corporate bonds, and others. In India, investors can consider bonds directly or via Debt Mutual Funds.

Gold

Indians are all-time gold lovers. They can invest in physical gold for prosperity or celebration. Digital gold is also an investment option for Indians. They can consider sovereign gold bonds (SGBs) also.

Real Estate

Real estate investment means purchasing residential or commercial properties for capital appreciation or generating rental income. It requires a significant amount of money. There is another option to invest in real estate without actually buying a property called Real Estate Investment Trusts (REITs). REITs allow investors to make lower capital as compared to actual property buy. Investors earn rental income from REITs.

Considering the life stage, financial goals and risk profile, Indian investors can choose asset classes. Start stock market investments with adequate knowledge and small amounts of money using a demat account and online trading apps of reliable discount stock brokers.