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Investment Avenues

Different investment avenues are available to generate financial wealth and provide you financial freedom. Let’s learn these concept below.

(Non-Market securities)  Non-marketable securities are securities, typically debt securities, that are difficult to buy or sell due to the fact that they are not traded on any normal, major secondary market exchanges. Such securities, if traded in any secondary market, are usually only bought and sold through private transactions .

In other word, Non-marketable securities are those securities which cannot be liquidated in the financial markets.

Some common examples are given below:-

  • Bank Deposits
  • Post office deposits
  • U.S. saving bonds,
  • Rural electrification certificates
  • Private shares
  • State and local government securities
  • Federal government series bonds

(Equity Mutual Funds) An equity fund is a mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed. Equity funds are also known as stock funds.

Equity funds are also categorized by whether they are domestic (India) or international. These can be broad market, regional or single-country funds.

  • Some specialty equity funds target business sectors, such as health care, commodities and real estate, Blue chip scrip, Growth scrip, Income scrip, Cyclical scrip, Speculative scrip

(Balanced Fund) Balanced fund means, it contains more than one component in balance manner like a stock component, a bond component and sometimes a money market component in a single portfolio.

In other words, Balanced funds are geared toward investors who are looking for a mixture of safety, income and modest capital appreciation.

Examples: DSPML Balanced, FT India Balanced, Kotak Balance, Prudential ICICI Balanced.

EPF(Employee provident fund) A provident fund is created to provide financial stability and security to elderly people. A person begins contributing to this fund when he/she starts out as an employee.

The contribution, in most cases, is on a monthly basis. The purpose of an EPF is to help employees save a  part of their salary every month to be used when the employee is no longer fit to carry on working i.e. when the employee has to retire from service.
Both the employer and employee contributes to the EPF at a rate of 12% of the basic salary and dearness allowance (if any) every month. The total contribution to the EPF is thus 24% per month.

PPF (Public provident fund) Public Provident Fund (PPF) scheme is a popular long term investment option backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax.

A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of Rs 1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year.

(Bond) A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.
Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.
Owners of bonds are debt-holders, or creditors, of the issuer.

It is a written and signed promise to pay certain amount of money on a specified date or with some specific condition.

Characteristics of a bond: –

  • Face value is the money amount the bond will be worth at its maturity, and is also the reference amount the bond issuer uses when calculating interest payments.
  • Coupon rate is the rate of interest the bond issuer will pay on the face value of the bond, expressed as a percentage.
  • Coupon dates are the dates on which the bond issuer will make interest payments. Typical intervals are annual or semi-annual coupon payments.
  • Maturity date is the date on which the bond will mature and the bond issuer will pay the bond holder the face value of the bond.
  • Issue price is the price at which the bond issuer originally sells the bonds.

(Real estates) Real estate is property comprised of land and the buildings on it as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water and minerals.

In simple terms, Real estate is the property consists of lands and building.

It is up three categories based on it’s used: residential (undeveloped land, houses,
condominiums, and town-homes), commercial(office buildings, warehouses, and retail store buildings) and industrial( factories, mines, and farms).

(Foreign or overseas mutual fund) It is a mutual fund, which is invest in companies located outside of its investor’s country of residency.

The difference is that a global fund includes the entire world, while an international fund includes the entire world excluding the investor’s home country.

(Money Market) the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in money markets is done over the counter and is wholesale.

There are several money market instruments, including treasury bills, commercial paper, bankers’ acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities.

(Derivatives) A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, index or security. Common underlying instruments include: bonds, commodities, currencies, interest rates, market indexes and stocks.

Futures contracts, forward contracts, options, swaps and warrants are common derivatives.

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