Learning about share markets requires you to understand the various investment options that are available to individuals.
Whether it is mutual fund investments or earning interest from government-backed gold bonds, it is crucial to choose the right investment.
Let`s look at the various investment options that we have and the risk and return associated with each.
• Fixed Deposits
Fixed Deposits (FD) are a facility offered by a bank which generates steady and fixed returns on an amount. The amount remains locked up with the bank for a fixed period, with early withdrawals leading to penalty charges. On average, FDs generate returns in the range of 5-6% per annum. The investments are risk-free and guarantee full capital protection to the customers.
• Real Estate
For a long-time investing in real estate has been the most attractive investment. Generally, people invest in buying houses, shops, or plots of lands to generate both rent income as well as benefit from its value appreciation.
• Mutual Funds
Mutual funds are funds contributed by a vast number of investors and managed by professional asset managers. There are different kinds of Mutual Funds which focus on a particular type of investments like large-cap companies, mid-cap companies, or concentrate on specific sectors for investment opportunities. These funds aim at generating returns similar to or better than a particular stock market index. These funds help individuals save money regularly, and earn more than what is provided by banks, in exchange for a small fee. You can choose multiple mutual funds like SBI equity hybrid fund, DSP mutual fund, etc.
• Exchange-Traded Funds (ETFs)
ETFs are like Mutual Funds, but its units are traded on the stock exchange. These funds are tied to a specific index or a basket of shares or a commodity like Gold / Silver. Investors have an option to buy the units of these funds directly from the exchange and sell them off whenever they want with little or no charges.
• Debt / Bonds
Investors have an option to buy/sell bonds directly from the bond market, issued by RBI or the Government of India. These bonds are backed by the government and provide risk-free interest and capital protection. Investors can also invest in corporate bonds issued by various companies by investing in a Corporate Bond Mutual Fund. The latter, in turn, have invested and generate a return from corporate bonds.
• IPO
Initial Public Offer is an offer for public to buying new shares of a private company that is about to be listed and traded on the stock exchange for the first time. Since these private companies don`t have an active market, there is a minimal impact on demand and supply on the company`s share price. When the shares are listed and traded for the first time, they list at a premium above the price issued. Investors can earn up to 60-70% from an IPO listing.
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