A famous Latin proverb says, “Do not commit all to one boat”.
Per experts, this ideology also works well for investors. Investment gurus recommend investment portfolio diversification for more than one reason.
But the first step to achieve that is to be aware of the different instruments of investment in India and their fundamental characteristics.
Only once you manage to find out such details, you can determine which among them matches your portfolio or your investment intent the most.
So, without further ado, let’s check the popular types of investment options in India.
Take Your Pick From These Investment Options!
Based on your risk profile and financial goals, you can park your money at any of these investment vehicles –
These represent company ownership. So, when you invest in shares, you buy a portion of company ownership. Investing in company stocks is considered exceedingly volatile as both risk and reward levels depend on several factors, including the economy, the company’s performance, and market movement.
Corporate or government bonds are popular means of investment in India for conservative individuals. Usually, they come with a fixed maturity period and generate interest income. The coupon/interest rate can be either fixed or variable, depending on the type of bond. When you compare bonds to stocks, you will find the former to be more stable. But these subject investors to credit and interest risk.
If you have limited funds to spare but would still like to diversify your portfolio, mutual funds are an ideal choice. These funds are essentially created by pooling money from different investors and allocating them across various asset classes as per the intended portfolio composition. Equity mutual funds, debt funds, hybrid funds, solution-oriented funds are a few examples.
Future & Options
Note that futures come with a right and obligation to buy or sell underlying stocks and other assets at a pre-set price and within a predetermined time. On the other hand, options denote a right where traders don’t have an obligation to buy or sell indexes during the contract. Both derivative products provide ample scope for generating returns and also help hedge current investments.
If mainstream investments do not catch your fancy, you can try alternative types of investment options in India, like invoice financing. It is one of the most popular choices in that regard. Via such options, investors purchase company invoices for a short-term, say 30-90 days. Invoice discounting or factoring helps investors diversify their portfolios significantly and fetch high returns ranging from 12% to 20%. If you are looking for a short-term investment option, check out fintech companies like KredX that feature such invoices for financing.
Initial Coin Offerings And Cryptocurrencies
Cryptocurrencies and ICO are virtual or digital assets that are gaining momentum in the market rapidly. They are characterised by high risk-reward quotients and, hence, require investors to research thoroughly before deciding. Note that to participate in an ICO, you will need Bitcoin or Ethereum.
Risk-averse and conservative investors also have multiple options for investment in India. Options like fixed deposits, recurring deposits, National Savings Scheme, Public Provident Fund, etc., are popular among investors. Usually, such schemes generate income at a pre-fixed rate and come with a maturity period. You may be required to meet additional criteria depending on the type of savings scheme you choose.
Insurance And Annuities
Annuities serve as a contract between an investor and an insurance company. It states that the insurance company will provide investors with period payment either immediately or in the near future. You can invest in annuities either in a lump sum or through a series of payments known as premiums. The most common types of annuities include – fixed, variable, and hybrid annuities.
Today, you can find multiple instruments of investment in India. However, before choosing any particular option, you may want to weigh factors like risk-taking capability, investment goal(s) and period. Similarly, don’t forget to account for market performances and trends to develop suitable investment strategies. You can also gauge investment instruments’ performance with statistical measures.