Investment Options

There are various types of investment options in India which, can yield you very good gains if, you want to invest money for long or short duration. Some people are quite market savvy and hence know how to invest in but those who do not have much knowledge about the market are usually not willing to take risks.

Following are few secure options that will protect your capital and give you assured returns:

Public Provident Fund (PPF): is an initiative by Govt. of India by which PPF Account holders earn regular tax free interest. The interest is paid by Government of India thus making it an attractive risk free instrument. All Indian Individuals can invest in this scheme and can earn a striking tax-free return which makes it better than the return offered by Banks on Fixed Deposits.

Post Office saving schemes/ Bank Fixed Deposits: This is one of the most popular forms of investment in India. This kind of investment is usually done in a bank. You take a fixed sum of money and deposit in a bank for a predetermined period of time. After the maturity of the term, you are paid an interest by your bank.

National Pension Scheme is a retirement benefit scheme but it has been introduced much later than EPF in the year 2004 on 1st of January. During the initial year it has been open only for the central government employee but from the year 2009 it made available to the every citizen of India.

From the year of its introduction it has gained an immense importance as it is controlled by the fund managers and the fund contributed gets invested into the market and hence earn a good return which develop a good retirement corpus for the individual.

Bonds: These are long term debt instruments. Bonds are issued by the government institutions, central government, state governments, private parties and other financial institutions. When you buy a bond, you lend your money to other parties and you are paid a sum of interest on maturity. These usually provide a fixed income to you and are issued by various organizations to raise capital. Usually large organizations need huge amount of money that cannot be provided by a single bank.

As you widen your risk horizon, then only you will get to explore the options that yield higher returns:

Investing in Gold: Gold has been an all-time favorite of Indians since ages. We have seen the tremendous increase in the Gold prices over the past decade. Gold prices rise in times of Inflation. If you buy some gold when market is low, then there might be a possibility to get your desired returns in the long run. But, for that you will have to time the market i.e. buy when prices are low. Besides, traditional jewelry there are numerous other ways to invest in Gold like Gold Bullion & coins, Gold ETFs, Gold Mutual Funds etc.

Mutual Funds: As the name suggests, mutual bonds are funds invested mutually. Mutual funds are instruments that pool in savings of various investors to invest them in shares, debt securities, money market securities etc. In simple words, Mutual funds further invest your money in :

*Debt Instruments - Debt Mutual Funds.

*Equity - Equity Mutual Funds.

You might have heard this line “Mutual funds are subject to market risk” and that is true. There is always some risk attached while investing in mutual funds.

Equity mutual funds are linked to equity so carry more risk as compared to Debt funds. But ,based on historic data, equity funds perform better and yield high returns if the amount is invested for a longer period.

However, if you still want to play safe, debt funds are a better option.

In order to enjoy good returns you have to invest your money in Mutual Funds for a longer period and SIP is a good way to do it.

Expected returns from any mutual fund depend on what kind of fund you are investing in. Each fund category and sub category has its own risk-expected return profile.

Assuming, you have rightly selected your funds you can expect returns in the range of 10–15% pa

However, do keep in mind the value of money reduces with time due to inflation.

SIP in Mutual Funds: SIP in nothing but a way to invest in mutual funds on regular frequency and most famous frequency is Monthly. Mutual Funds are collection of stocks or bonds that a professional Fund Manager buys on behalf of you. Fund Manager decides which stock or bond to buy and how much. A mutual fund then distributes the entire investment amount in small units (called units). Investors can buy these units instead of buying stocks directly.

Portfolio of Mutual Funds: A portfolio is basket of mutual funds. you can also create your own portfolios. Portfolio helps you in diversifying your investments and reduces risk.

Mutual fund allow normal investor to participate in the equity market with less active monitoring, getting expert mutual fund adviser to monitor the fund and diversify the risk to a large extent.

There are three factors you need to consider:- No of years, Amount and Rate of Return.

Equity gives return equal to real rate+inflation+equity risk premium 3%-5%(approx).

Following two factors should be taken into consideration while selecting a Mutual Fund:

TIME PERIOD: The most important factor that should be kept in mind before investing in Mutual Fund is that after how much time you need the money. Generally people invest in Mutual Fund thinking that they will exit whenever they will get good return. This approach can be very dangerous & eventually you will be in huge loss.

RISK TAKING CAPACITY: Generally people say that they can take risk & will not be affected by the market volatility. But once the market starts correcting, you can see the panic all around. In case you are 1st time investor or not confident about how things will pan out, start with debt mutual fund.

There are generally 2 schemes running in the industry for each fund, one is a growth scheme, other is a dividend payout - difference being, when a funds capital appreciates (by way of stock appreciation, dividend, bonus, split) - the funds Net Asset Value (NAV) - moves accordingly, and in a growth fund, the added income is reinvested, whereas in a dividend option, the added income is payed back to your savings bank account. There are other things also like NAV reduction etc. but I feel you should get into that only after you have been comfortably investing for over 12+ months and understand the basic dynamics.

Direct Equity markets can provide you relatively higher returns based on your risk appetite. You can get 14%-18% or even higher returns if you invest in equity. But, there is a very high risk involved and returns are not assured. So, if you are new to investing it might be very risky for you. You have to be extra cautious while putting your funds in Equity since the returns are based on market fluctuations.

When you buy the stock of a company, you become one of the owners of the company. You would have a share in the net profits that the company gets after meeting the expenses like paying taxes, payment of raw materials etc. Although investing stocks is quite beneficial, you should know which company to invest in to gain maximum benefits.

So ,If you want to invest your money in an efficient manner and get good returns in the long run just be clear about your finance goals and move accordingly.

Diversify your funds and Plan for Your Long term Goals are the keys to a Sound Financial Portfolio.

SIMPLE Steps to Enter and Make Profit in STOCK MARKET

Open a demat account in Wherever you want ( Ex- Kotak securities , Sharekhan, Angel Broking , Edelweiss etc)

Once you have a demat account Invest in stocks which are UNDERVALUED or has CHEAP valuation. Don’t ever go with market volatility, have faith and follow “BUY RIGHT HOLD TIGHT” Strategy. Always give at least 6 month to make you money grow especially in equity. If you were able find the pearl in the ocean then result would be extraordinary.

Make use of market’s nature and always keep one thing in your mind “Market will always give you the chance to invest” what you have to do is to find Pearl in the sea.

“Shares are like fruits, it has seasons” for Example if you noticed in summers every Feb to July VOLTAS will be on its peak, because people will definitely BUY air conditioners/or related products in summer then the Result is right here.

As MONSOON coming near kaveri Seeds will be on its peak.

1.      If you’re not constantly trading and making changes to your portfolio, that doesn’t mean that you are doing something wrong. Many times, the best move is to actually do nothing.

2.      Don’t be overly concerned with the day-to-day fluctuations of the stocks in your portfolio. If you’ve found some good companies, and invested in them consistently, then after 10 years you’ll have a good average price and those short-term fluctuations will have balanced themselves out. Ultimately, you are looking for strong long-term growth of your companies. Don’t miss out on a great company with a slightly higher price just because you’re hoping for a short-term fluctuation to exploit.

5. Consider some technical aspects before buying any share

Some Terms (Technical aspects) which I consider while buying the shares are as follows,

·         CMP

·         Book value

·         Cash flow

·         PEG raio

·         debt equity ratio

·         company’s future prospective

·         brand name

·         scope in the industry

·         FIIs and NIIs interest

·         margin of safety

·         ability to pay liabilities

·         Current ratio

·         Quick ratio

·         Net sales

·         Annual revenue growth

·         sales turnover

·         ROE

·         EPS

·         PE

·         PBV

·         Deliverables

Before investing even a single rupee I analyze or see each and every aspect, I don’t panic in market fluctuations and I give at least 5–6 months horizon, Then after this patience I get good result. “Buy the shares like you are buying a piece of business”

.

Always remember “BUY RIGHT HOLD TIGHT”

1.      Read, Read and Read: Most of my stocks I have bought is because of consistent reading I do. Read the many good books on finance written by top investors of the world like The Intelligent Investor, The little book that still beats the market etc. etc. Like that there are so many books and the list is many. Read one at a time and jot down the lessons learnt.

Reading economic times daily will update you about the current affairs of market. Reading Quora also helped me a lot about choosing the right stocks at the right time.

2.      Bet big when you have string conviction: Don’t worry about betting big when you have strong conviction about something. You can take the risk of losing 10% at a cost of earning more than 50%.

3.      Recommendations even if they are excellent won’t fetch you good returns: Don’t invest in stocks which are recommended by someone. May be they are excellent but even if they are so , you will most likely book premature profit and exit because you don’t have enough conviction about the share. However, if you do your own research, you have the conviction till the stock reaches a certain target price and then you can sell booking much better profit.

4.      Don’t lose peace of mind: Whatever is your style of trading or investment. Whether it is intra-day , short term investments , long term investment, or F&O. Take it light. You should not be day dreaming that investments you made would be sky rocketing in few months making you richer sooner or for that matter you should not always be worrying about a stock which is not performing or about the loss you made few days back. Of-course, your money has gone into it but if you are losing peace of mind and it is impacting your main line work which gives you a monthly stream of money, then just drop it. It is not worth it if you are lagging behind your colleague’s package wise and performance wise because a part of your mind is always occupied with the investments, then it is not worth it.

5.      Diversify. Never invest in just one instrument. Invest in both low and high risk avenues as per your risk appetite. You should never concentrate your portfolio among few asset classes. It increases the risk of losses. Instead, diversification may help to ward off portfolio risk to a large extent. In this regard, mutual funds can be ideal investment havens. These offer you professional fund management along with diversification.

6.      Growth takes time. Have patience and watch your investment grow.Choose your investment options based on an asset allocation. This will also help you to reach your goals within a specified time frame. Start investing as early as possible. It’s the holding period which makes the money. You can never choose ‘all’ winning stocks in your portfolio. There will always be few outliers.

Informal Lending:

In India, there is customary informal borrowing done at 2% per month interest rates. People have been doing it for years. You can find such opportunities in your city. There is some risk of likely default, but that can be mitigated by spreading it over a number of borrowers.

It depends on the trader/ investor and his capacity to take risk. It is possible arithmetically, but when the money involved becomes huge, the risks become higher and decision making gets impacted.

Real Estate: This is a good Long term Investment Option option but involves a huge sum of money. So, practically you should plan for it once you have parked some money for other needs like Insurance, Retirement funds, emergency funds etc. Your property might appreciate immediately or it might take years for its prices to rise based on Market fluctuations.

A New Business: May be its possible, that you can earn such returns if you put your money in some good business. For getting the required returns you will have to look for some profitable venture/business but that too is linked with some kind of uncertainty. However, in the long run you can easily generate high returns in a well setup business.

Always invest in the tax savings scheme.

Build an emergency investment. Never touch or confuse with other investments. Before investing, you need to create an emergency fund. It is required to meet the contingent monetary requirements without dipping into core sources of money. Ideally, it should be equivalent to 6 months of personal expenditure.

You can think of investing that money in a liquid fund instead of keeping it idle. In this way, it’ll generate returns and you would be able to redeem during a contingency without loss of value.

Invest in the long term. Plan your long term goals, bucket lists and start investing early.