Where to invest money other than stocks?

28 Jan 2020

When you hear about investments, the first thing that crosses the mind is stock market. The stock market may be the most preferred investment platform, but it is not the only one available. There are various forms of investment available apart from shares and stocks.

There are many ways to invest money including mutual funds, real estate, the list is seemingly endless. Investments can be classified based on the risk associated with it because when you invest money, your money is at risk.  Here's our reference guide to all the different kinds of investments and what they mean.

You will probably come across a handful of terms associated with investments. We've listed a few of them below. These terms generally refer to the actual stuff they are invested in, but, of course, they have specific definitions, too. It is necessary to have a basic understanding of these terms before investing.

Assets: -A got resource expected to grow in value.

Holdings: -The specific assets in an investment portfolio.

Portfolio: - Individual "portfolio" refers to all of one’s investments, as a group. Diversifying portfolio means investing in a variety of assets.

Elaborating the Investment Risk Ladder, here are the major asset classes, in ascending order of risk, on the investment risk ladder

1. Cash: - A bank cash deposit is the simplest, most easily understandable investment asset and the safest. Not only does it give investors good knowledge of the interest they'll earn, but it also guarantees they'll get their capital back. Certificates of deposit are highly liquid instruments, very similar to cash that are instruments that typically provide higher interest rates than those in savings accounts. Hence, money is locked up for a while and there are abilities early withdrawal penalties included.

2. Bonds: - A bond is a debt instrument representing a loan made by an investor to a borrower. A typical bond will include either a corporation, where the borrower will matter a fixed interest rate to the lender in exchange for using their capital. Bonds are commonplace in organizations that use them to finance operations, purchases, or other projects. Usually the interest rates define the bond rates. This is the reason there is a boom in the trade volumes whenever the banks raise the interest rates.

3. Stocks: - Shares or stocks let investors participate in the company’s success via increase in the stock’s price and through dividends. In case of liquidation of the company all the shareholders can claim the assets of the company, but they do not own any part of it. Holders of common stock enjoy voting rights at shareholders’ meetings. Holders of preferred stock don’t have voting rights, but they do receive preference over common shareholders in terms of the dividend payments.

4. Mutual Funds: - A mutual fund is a type of investment where more than one investor pools their money together to purchase securities. Mutual funds are managed by portfolio managers who allocate and distribute the investment into stocks, bonds, and other different form of securities. Individuals may invest in mutual funds for as little as 10,000 per share, letting them diversify into as many as 100 different stocks contained within a given portfolio.

There are different mutual funds that are actively managed, meaning they are updated by portfolio managers who carefully track and adjust their allocations within the fund. However, these funds usually have greater costs such as annual management fees and front-end charges which can cut into an investor's returns.

5. Exchange: -Traded Funds: - Exchange-traded funds have become quite popular since their introduction back in the mid-1990s. ETFs are like mutual funds, but they trade throughout the day, on a stock exchange. In this way, they transparent the purchase-and-sell behavior of stocks. This also means their value can change during a trading day.

ETFs can track an underlying such as NIFTY. This can involve anything from emerging markets, individual business sectors such as biotechnology or agriculture, and more. Due to the ease of trading and wide coverage, ETFs are properly popular with investors.

A proper analysis of risk profile helps you take a decision about the type of investment you should plan. A certified investment advisor can guide you in selecting the right investment option based on your risk profile. There are various risk-free investment options available in the market. If you are against market risks, you can choose one from them. You should choose the one which suits your risk appetite.

Happy Investing!!

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