The world of investing can get confusing to newbies. With investors understanding the importance of investing, it is equally important to know where to invest. This article will focus on top 4 types of investments available to individuals.
Main types of investment
Following are the primary investment options available to investors:
Mutual funds
These are financial investment vehicles that pool the money of different investors to invest in securities such as equities, fixed-income securities, money market instruments, etc. These funds are professionally managed by a fund manager to fetch the highest possible returns on mutual fund investment. The returns are produced in line with the market performance of the particular fund. Mutual funds are further broadly classified into debt funds, equity mutual funds, and hybrid or balanced funds. Investors can invest in mutual funds either via SIP (Systematic Investment Plan) mode or Lumpsum mode.
Stocks
Stocks are considered as direct investment in equities, which is also one of the best long-term investment options. When an individualbuys stocks, they become a part-owner of the company. The risk-reward ratio for equities is higher than any other form of investment options. This means that although equities are often associated with high-risk securities, they also have the potential to generate the highest possible returns than any other type of investment.
Bonds
Bonds or fixed-income securities are loans people make to a government or a company. When an individual buys a bond, they give the bond issuer the authority to use their money and reimburse them back with a fixed interest. Bonds are usually considered as one of the safest investment options, butthey also have relatively lower returns. As an investor, you can choose to invest either in corporate bonds or government bonds which are the safest type of bond to invest in.Investors make regular money via bonds as it falls under the fixed-income category. Interest is generally paid to investors following recurrent payment instalments which could be once or twice in a year till the bond’s maturity date.
Real estate investment
One of the fastest-growing sectors in India, the real estate sector holds vast prospects for different sectors such ascommercial, retail, housing, manufacturing, hospitality and much more. Investors are provided with an option to invest in commercial or residential properties or even in real estate mutual funds to gain substantial returns. The risk involved in real estate investment is quite low, but, at the same time, the chances of the property prices shooting up are huge. Real estate investment is regarded as one of the best investment options that has the potential to deliver high returns. Timing is crucial when one considers to invest in real estate. An investor should be mindful that real estate investments are highly illiquid, i.e. it might be tough to sell the property rapidly in case of an urgent monetary requirement.
The important thing with investing is diversifying your investment portfolio. So look for inevstment options that best suit you portfolio and begin financial planning. A financial plan goes a long way to achieve your goals – be it small-term or large-term goals. Happy investing!
