Article

Where to Invest - An Introduction to Asset Class

05 May 2017 Prasanth Menon

New Page 1

Investment is good but ignorance is not. Especially when your hard-earned money is at stake. It is essential to know the various investment options that are available. For easier understanding, investments are divided into asset classes. These are nothing but groups of a similar type of investments. For example, if you like to play cricket, football, and volleyball your asset class would be outdoor games. If you like to play chess, snakes and ladders or ludo, your asset class would be board games.

The major asset classes include:

Debt (Fixed Income) Assets

Debt investment is when you lend your money into something and earn interest on the amount invested. On the completion of the tenure, you also get the principal amount back. This investment helps preserve principal and offers a regular flow of income in the form of interest. Have debt funds reduce the risk of your investment portfolio as well. They tend to lead to capital appreciation and help economic growth.

Equity (Stock and Shares) Assets

This is the biggest class of assets in the entire category. It means buying a certain number of shares in a business, thereby owning a part of the company. Companies issue equity to raise capital for their business. You, as an investor, get to enjoy a share in the profit through dividends. You can also avail tax benefits and enjoy good liquidity. It is a well-regulated structure and leads to economic development of the country as well.

Real Estate Assets

Real estate assets go through the same ups and down like equities. They, however, have a slower upside and downside as compared to the other assets. These investments are also highly illiquid and offer little diversification. But your returns and risks would be somewhere in between that you get from the previous two classes. This does provide capital appreciation in the long run.

Gold Assets

Gold is known as a ‘precious metal’ carrying store of value. It is a safe asset to invest even during economic stress. It usually offers portfolio diversification and acts as a hedge against the inflation. You can invest in the non-physical form of gold such as Gold Exchange Traded Funds (Gold ETFs).

Investment Options Based on Asset Class (IG Content)

Investment has to be divided into smaller asset classes based on the type you choose to put your money in.

Debt Investment include:

  • Fixed Deposits

  • Government Bonds

  • Corporate Bonds

Equity Investment includes:

  • Stocks

  • Shares

Real Estate Investment includes:

  • Residential Property

  • Developmental Property (Land)

Gold Investment includes:

  • Jewellery, Coins, Bars

  • Gold ETFs and Gold Funds

To sum it all:

Investment is divided into the separate asset class and each class has its own pros and cons. You need to be sure of the purpose of investing and choose the asset class that suits you the best. You can either go for one asset class or invest in multiple ones for diversification of your financial portfolio.

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Beginner's Corner

Where to Invest - An Introduction to Asset Class

05 May 2017 Prasanth Menon

New Page 1

Investment is good but ignorance is not. Especially when your hard-earned money is at stake. It is essential to know the various investment options that are available. For easier understanding, investments are divided into asset classes. These are nothing but groups of a similar type of investments. For example, if you like to play cricket, football, and volleyball your asset class would be outdoor games. If you like to play chess, snakes and ladders or ludo, your asset class would be board games.

The major asset classes include:

Debt (Fixed Income) Assets

Debt investment is when you lend your money into something and earn interest on the amount invested. On the completion of the tenure, you also get the principal amount back. This investment helps preserve principal and offers a regular flow of income in the form of interest. Have debt funds reduce the risk of your investment portfolio as well. They tend to lead to capital appreciation and help economic growth.

Equity (Stock and Shares) Assets

This is the biggest class of assets in the entire category. It means buying a certain number of shares in a business, thereby owning a part of the company. Companies issue equity to raise capital for their business. You, as an investor, get to enjoy a share in the profit through dividends. You can also avail tax benefits and enjoy good liquidity. It is a well-regulated structure and leads to economic development of the country as well.

Real Estate Assets

Real estate assets go through the same ups and down like equities. They, however, have a slower upside and downside as compared to the other assets. These investments are also highly illiquid and offer little diversification. But your returns and risks would be somewhere in between that you get from the previous two classes. This does provide capital appreciation in the long run.

Gold Assets

Gold is known as a ‘precious metal’ carrying store of value. It is a safe asset to invest even during economic stress. It usually offers portfolio diversification and acts as a hedge against the inflation. You can invest in the non-physical form of gold such as Gold Exchange Traded Funds (Gold ETFs).

Investment Options Based on Asset Class (IG Content)

Investment has to be divided into smaller asset classes based on the type you choose to put your money in.

Debt Investment include:

  • Fixed Deposits

  • Government Bonds

  • Corporate Bonds

Equity Investment includes:

  • Stocks

  • Shares

Real Estate Investment includes:

  • Residential Property

  • Developmental Property (Land)

Gold Investment includes:

  • Jewellery, Coins, Bars

  • Gold ETFs and Gold Funds

To sum it all:

Investment is divided into the separate asset class and each class has its own pros and cons. You need to be sure of the purpose of investing and choose the asset class that suits you the best. You can either go for one asset class or invest in multiple ones for diversification of your financial portfolio.