Lets get to the core of investing. But,give it to the need of perfection of Mr.Investment Tool(lets call him MR.IT),he will take you the through the scratch.
The investment options in its broadest sense can be diversified into:
§ Physical assets like real estate, gold/jewellery, commodities etc.
§ 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.
Now,for those of us having investments in the first category wont be reading my blogs solely for the matter that they are much ahead of me in realising their dream cos the first category of investment requires a fairly large capital to begin with:-(.But, for those for whom the first category is some years away and the second category seems all gibberish with jargon’s imported from the planet MARS, we shall ask MR.IT to help us enchipring the second category.I am not focusing on the first category for the reason i mentioned earlier though,with the realisation of the second,we will be moving to first for sure:-)
Now,Financial assets,as they are called are the most popular tools in the market for the sole reason since they allow for comparatively lesser lump sums of investment money and also regular investment.But,they arent a piece of cake to understand.Are they??I am still breaking my head over a lot of them:-)
The financial assets can be further demerged into
2.Equity & Equity Related Instruments
Before we get into the details ,a point worth mentioning which i picked up from a very good magazine is that,the indulgence in these two insturments should be on a mixed basis to ensure capital gain as well as security.A generic approach suggests a 25%(debt) and 75%(equity) exposure ,but then these change according to one financial goals,age and obviously various factors which we will come across later.
These are nothing but a glorified form of a savings bank account in more ways than one. The primary being that these are oriented protecting your capital and then, aim to maximise returns. In other words,they are virtually risk free but don’t aim at high returns.Most of these instruments earn a decent 10 odd % on the investment with pros and cons of their own.So,the investors(aren we all supposed to be addressed like this) with a low risk-appetite, this is the way to go.I am briefly discussing the few options available:
1.Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument, which can be availed through any post office. It provides an interest rate of 8% per annum, which is paid monthly. Minimum amount, which can be invested, is Rs. 1,000/- and additional investment in multiples of 1,000/-.
2.Public Provident Fund: A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum compounded annually. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefits can be availed for the amount invested and interest accrued is tax-free.
3.Fixed Deposits with Banks are also referred to as term deposits and minimum investment period for bank FDs is 30 days. Fixed Deposits can be considered for 6-12 months investment period.
This is just and insight into one of the very few commonly used debt instruments,which are available in the markets.Since,this form of investment is not my forte i will not divulging a lot into it.Though,i would love to clarify any doubts if one comes across.Any one willing to put their money in these instruments should take extreme caution and undergo a complete research before opting for any of these.
We will get Mr.IT to discuss the second category in the next post,which even i will be able to contribute a bit:-)
Till then Happy Saving and Happy Investing…!!!!