TYPES OF INVESTMENT

Investing is broadly speaking the practice of putting your money for a while in a project to generate positive financial returns. India’s financial market has evolved exponentially. Investors can research thoroughly and choose from a wide variety of investment options that can be short-term or long-term. Your choices of investments should depend on your financial goals and timeline and also how much risk you are willing to take.

It is important to know the basics of investing before putting you hard earned money in a project. Deep research or having an investment advisor guide you can help you make an informed decision. There are various types of investments that can help you achieve financial security. Below mentioned are top five ways of investment to help grow your wealth:

STOCKS

Stocks are also known as equities or shares. It is a direct investment in any business. A buyer of a company’s stock becomes a shareholder (fractional owner) of that company. Investment in stocks provide avenue for wealth creation over a long period of time. Investing in stocks is a high-risk investment. It takes a lot of research to understand the different types of investment opportunities and identify the beneficial stocks to invest in. Money is made on a stock when the stock value increases or the company decides to pay dividends to the shareholders. But the stock price can also go down and the company may not pay a dividend. The stock’s value depends on the company’s financial stability, size and profitability. Stocks are exposed to various risks especially the changing economic conditions and fluctuations of currencies.

MUTUAL FUNDS

Mutual Funds (MFs) allow you to hold a portion of many more investments that you can purchase on your own. Investors pool their money to buy assets together, benefiting from shared costs and professional expertise. Mutual Funds invest in market linked instruments stocks, bonds or both. When you invest in a mutual fund, you are basically hiring a professional to manage and make investment decisions on your behalf. Investors earn returns through capital gains when fund holdings increase in value, dividend or selling shares for a profit. Mutual Funds are usually a low risk investment because most mutual funds offer a level of built-in diversification.

REAL ESTATE

Real Estate investment is the practice of purchasing property as an investment rather than as a primary residence to generate more income. You can purchase commercial or residential properties to generate regular rental income. Real Estate is a leveraged investment. There are Real Estate investments funds (REITs) that offer a way to invest in real estate without having to own, finance or operate properties.

BONDS

Bonds are a type of debt investment that is a fixed-income security offered by businesses or governments. When you buy a bond, you are essentially lending money to a business or the government. Companies issue corporate bonds and local governments issue municipal bonds. While the money is being lent, the lender gets interest payments. Once the bond matures, the lender receives the original investment back plus the interest accumulated on that loan over time. The rate of return for bonds is usually much lower than stocks but bonds are mostly low risk investments.

FIXED DEPOSITS

Fixed Deposits (FD) is a safe investment option that allows you to earn a fixed interest rate on your money for a set period of time. FDs are usually offered by banks and non-banking financial organizations (NBFCs). You invest a sum of money in one of these and the interest rate is fixed when you open the deposit. You earn interest at regular intervals or at maturity. Fixed Deposit is a short term and low risk investment.