The ABC’s of Investing

Nutan Gupta

25 Sep 2017

Untitled Document

The money that you earn is partly spent and the rest is saved for a rainy day. Savings refer to the funds that are kept aside in safe custody, such as a savings account. Instead of keeping this money idle, you can invest your savings in various financial instruments which will pay you a hefty return in the near future.

The question that arises now is how and where to invest this money. Potential investors can always take the help of a financial advisor and an investment advisor, both of who are capable of providing detailed knowledge on the subject on investment and investing money. Investors can start investing after fulfilling the following simple steps:

  1. Obtaining documents relating to Personal Identification Proof and Address Proof.
  2.  Approaching intermediaries like a broker, RM etc.
  3. Filling up the KYC form and furnishing the details required.
  4. Filling up of the broker-client agreement.
  5. Opening a DEMAT Account and linking it with a savings account.

As soon as these steps are completed, an investor can start investing in the financial market.

The investment options can be well classified into 2 parts. They are:

  1. Physical assets: It comprises of tangible items like real estate, commodity, goldand silver in the form of jewelry and even antiques. 
  2. Financial assets: It comprises of FDs with banks, small savings instruments with the post offices, provident fund, pension fund, money market instruments and capital market instruments.

The money market gives the scope of short term investment options. It deals with debt instruments such as bills of exchanges, commercial bills, treasury bills, certificate of deposits etc. These have relatively low risk and relatively low returns. However, they are one of the safest investment options, especially for those investors who want to play safe.

A capital market is an option for long term investment. The various instruments of capital market are shares of companies (equity), mutual funds, SIP investment, derivatives market, IPOS, etc. These have a higher risk and higher returns in comparison to the instruments of the money market. Although stock investing is considered to be more rewarding, the high risk factor associated with it can result in loss if there is a downswing in the activities of a company.

The investment strategies of an individual depend on certain factors, such as:

  1. The risk taking appetite of investor
  2. The time horizon of investment
  3. Expected return
  4. Need for investment

Investments make our fund grow over a period of time whereas savings is just idle cash. Our short term needs can be fulfilled with the help of our savings but for the achievement of our long term financial goals, investment is a must. This is only possible with financial planning.

Have Referral Code?

Similar articles

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

Load More
mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


Banner

The ABC’s of Investing

Nutan Gupta

25 Sep 2017

Untitled Document

The money that you earn is partly spent and the rest is saved for a rainy day. Savings refer to the funds that are kept aside in safe custody, such as a savings account. Instead of keeping this money idle, you can invest your savings in various financial instruments which will pay you a hefty return in the near future.

The question that arises now is how and where to invest this money. Potential investors can always take the help of a financial advisor and an investment advisor, both of who are capable of providing detailed knowledge on the subject on investment and investing money. Investors can start investing after fulfilling the following simple steps:

  1. Obtaining documents relating to Personal Identification Proof and Address Proof.
  2.  Approaching intermediaries like a broker, RM etc.
  3. Filling up the KYC form and furnishing the details required.
  4. Filling up of the broker-client agreement.
  5. Opening a DEMAT Account and linking it with a savings account.

As soon as these steps are completed, an investor can start investing in the financial market.

The investment options can be well classified into 2 parts. They are:

  1. Physical assets: It comprises of tangible items like real estate, commodity, goldand silver in the form of jewelry and even antiques. 
  2. Financial assets: It comprises of FDs with banks, small savings instruments with the post offices, provident fund, pension fund, money market instruments and capital market instruments.

The money market gives the scope of short term investment options. It deals with debt instruments such as bills of exchanges, commercial bills, treasury bills, certificate of deposits etc. These have relatively low risk and relatively low returns. However, they are one of the safest investment options, especially for those investors who want to play safe.

A capital market is an option for long term investment. The various instruments of capital market are shares of companies (equity), mutual funds, SIP investment, derivatives market, IPOS, etc. These have a higher risk and higher returns in comparison to the instruments of the money market. Although stock investing is considered to be more rewarding, the high risk factor associated with it can result in loss if there is a downswing in the activities of a company.

The investment strategies of an individual depend on certain factors, such as:

  1. The risk taking appetite of investor
  2. The time horizon of investment
  3. Expected return
  4. Need for investment

Investments make our fund grow over a period of time whereas savings is just idle cash. Our short term needs can be fulfilled with the help of our savings but for the achievement of our long term financial goals, investment is a must. This is only possible with financial planning.

Have Referral Code?