Understanding the investment landscape is paramount to the success of any investment plan. It is easy to get intimidated by the plethora of investment options available today. However, understanding these options can be your first step towards being a prudent and well informed investor. Here is a quick peek:
BONDS & DEBENTURES: These are debt instruments issued by a company to raise capital from the market for a fixed rate of interest. Investors can buy these debentures/ bonds and earn interest on the amount invested. It is important to understand that these investments are not backed by any assets. The amount is invested purely based on the creditworthiness of the company.
COMPANY DEPOSITS: Like a bank, many companies accept deposits from people for a specific term at a fixed rate of interest. These deposits are called Company Deposits. The company’s creditworthiness must be considered before investing in a company deposit.
MUTUAL FUNDS: A Mutual Fund is a pool of funds collected from investors having similar financial goals, managed by a professional fund manager and invests in assets that are in line with the predefined objective of the fund. There is a wide array of mutual funds to choose from and you must understand the investment objective of the fund clearly before investing.
LIFE INSURANCE POLICIES: Life insurance policies have evolved from just offering life cover to being a good investment option. Many people prefer this option as it provides insurance, offers tax benefits and offers decent post-tax returns. Experts advise to invest in life insurance policies only if you need the insurance and not as a standalone investment option.
EQUITY: A name that has become synonymous with investment, especially over the last two decades, Equity refers to the shares issued by a company. There is a huge primary and secondary market for investing in equities. Investing in equities needs a good amount of understanding of the market and is recommended to people who are willing to spend time researching before investing.
REAL ESTATE: Another hot favorite of Indians and people around the world, real estate has been round ever since humans started settling in colonies. It has the potential of offering regular rental income apart from the appreciation in the value of the property.
GOLD: It is one of the oldest type of investing and has been believed to be an excellent passive investment option by people for centuries.
These investment options have evolved over years to help people invest according to their individual risk preference, investment objective and the investment tenure. Defining the amount of risk of capital that you are willing to take can help you narrow down to the investment options that align with your investment objectives. Investing early in life plays an important role in investment planning.
