Investment Alternatives

Investment is the sacrifice of present rupee and resource for future rupee return.
Generally in
investment we committee our time, money and efforts for future additional monetary or non
monetary return.
- By Graham and Qadds Security Analysis Investment Management is the process of managing
money, including investments, budgeting, banking and taxes, also called as money
management.
Investment of any kind is guided by two attributes: time and risk. The sacrifice or commitment of
resources takes place in the present and is certain. The reward comes later and the magnitude of
return is generally uncertain. Therefore, every investment entails some degree risk.
Investment has two meanings: Investment in economics means purchase of capital goods also
termed as "Real Investment". Investment on some kind of tangible assets, such as land,
machinery, factories, buildings or putting one self through college are some best examples of
economical investment.
Investment in finance means buying securities or other monetary or paper (financial) assets in the
money markets or capital markets or in fairly liquid real assets, such as gold, real estate or
collectibles.
Investment must ensure that money will be available when it is needed and the invested money
should grow because a Rupee's real value today is greater than a Rupee's value tomorrow in a
world of inflation.
various investment options available:

There are various investment alternatives which are available to an Indian investor. An
investor may select one or a combination of the best investment options which appeals
to him or her. The selection of the investment options also depend on the age, income,
dependents, etc of a particular person, you can read more about this in asset allocation
strategies.
Government Securities (Bonds): Bonds issued by Central or State government.
These bonds are termed as the safest investment instruments in India. Example of these
bonds are Dated government security which are issued for a period of 10 years with a
fixed coupon payment.
These securities carry least amount of credit risk as they are backed by the Government
of India.
Equity: Investing in direct equity. One can start investing in Indian equities by
participating in primary markets (applying for IPOs) and also by purchasing securities
from secondary markets (stock exchanges).
Investing in direct equity is termed risky and one needs to diversify the risk by investing
in multiple securities from various sectors. Example: investing in real estate stocks,
pharma stocks, PSU stocks and Oil stocks all at once.
Equities carry the maximum risk and (may) also provide you with maximum returns..
Investors can also participate in equities by investing in mutual funds.
Mutual Funds: Mutual fund is a financial instrument created with pool of investments
from many investors. Mutual funds are professionally managed and they invest in
equity, debt, gold, foreign equity, etc. on your behalf.
Mutual funds are one of the best way to diversify your portfolio.
SIPs are a form of Mutual fund where one tends to invest systematically i.e. once a
month or once in three months, etc. [I will come up with a detailed post on mutual funds
soon.]
Debentures/ Bonds: Corporates need money and they dont go to banks every time
to fulfill their needs, they have two options to raise money come up with an IPO or
issue bond with fixed term to maturity and fixed coupon payments. They function just
like the government bonds and the only difference is that they are a bit riskier
compared to government bonds.
Returns offered by these bonds are higher compared to government bonds.
Real Estate: In India investing in real estate is considered as the best form of
investment but only after gold. Historically real estate has performed well in India.
Investing in metros has become very expensive so it is advisable to invest in outskirts.
For example Vashi, Vasai, Bhiwandi around Mumbai.
Gold: The only form of investment which most of our mothers and fathers would
believe in. Gold is considered as the best investment in India, that is the only reason why
India is the highest consumer of gold in the world.
Most of the people in India buy physical gold. ETFs, Mutual funds, etc. are yet to pick
up as an investment avenues in India.
Bank fixed deposits: This considered as one of the traditional ways of Investing.
Most of the people in India with a bank account will have at least one fixed deposit. FDs
offer a fixed return at the end of specified period.
Currently bank FDs offer somewhere around 8% to 9% returns annually.
Corporate Fixed Deposits: They are just like bank FDs they only difference is that
they are issued by corporations. They are a bit riskier compared to bank FDs as most of
these corporate deposits are unsecured an hence offer higher interest rate.
They offer interest rates as high as 12% to 13% p.a.
An example of this would be FD by Mahindra Finance, Shriram Transport Finance,
etc.
Post office savings schemes: These saving schemes by post offices are trusted by
many Indians. The scheme attracts decent returns. One can start investing with as low
as Rs 100 per month. Check out the details here.
National Pension Scheme: The National Pension System (NPS) is a defined
contribution based pension system launched by Government of India. This instrument
is used for retirement planning by many. One can find more detailshere.
Commodity: This is one of the latest passion for investors, trading in MCX to offset the
risk of their equity portfolio. Many headers and arbitrageurs use this financial
instrument.
Retail investors can invest in commodity with the help of commodity mutual funds in
India.
Investing in Art: Art as a form of investment is quite common in developed nations

and the trend is picking up in India. Many affluent Indians buy art preserve it and
diversify their portfolios! [I will soon be writing a detailed post on the same]
Venture Capital/ Angle Investing: Investing in someones business idea at an early
stage of the venture. You get equity for the amount invested and one can exit the
investment when the business is acquired by some other company or when the company
gets listed. These investments are highly il-liquid and carry huge risk.
It is not advisable for a retail investor to invest in these kind of instruments.
We tried to cover most of the assets where an Indian investor can invest their money.
Did we forget to mention any instrument? Comment and share your thoughts.

Investment Alternatives

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Investment Alternatives

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Investment is the sacrifice of present rupee and resource for future rupee return.

various investment options available:

Investing in Art: Art as a form of investment is quite common in developed nations

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