Different Types Of Investment Options in India

Today, investors have a host of investment avenues or asset classes to choose from. Understanding the different investment options is vital for designing a favourable portfolio mix. Let us explore the different types of investment options.

1. Stocks Stock markets give companies access to capital and investors a slice of ownership in a company with the potential to realize gains. Dividends also provide periodic income to the shareholder but are declared at the discretion of the company. Although equity is considered to be volatile, investors who hold stocks with a view of medium to long term perspective have usually benefitted from capital appreciation.
2. Mutual Funds Mutual funds are investment vehicles that pool money from the public and invest the accumulated corpus in stocks, bonds, money market instruments and other securities. The USP of mutual funds is that they offer risk diversification by exposing the investor’s funds to various asset classes and securities. A mutual fund is an established trust that appoints an experienced professional, i.e. a fund manager to devise investment strategies and manage the scheme's portfolio.
3. Term Deposits Term deposits are a time-honoured investment avenue that investors use to park a lump sum amount for a fixed period of time and earn regular interest. The rate of interest is predetermined. Term deposits are mainly offered by banks, NBFCs and post-offices. The two main types of term deposits are recurring deposits and fixed deposits.
4. Pension Plans The Indian government has from time-to-time implemented several plans to offer financial security in the form of pension. These plans mainly entail financial products that enable investors to make small savings and ultimately build a retirement fund. Some of the popular pension schemes include the National Pension Scheme , Senior Citizens Savings Schemes , PMVVY, etc.
5. Real Estate Owning real estate has been one of the top priorities for almost every Indian household. Rent from real estate provides a steady and regular source of income. Real estate investments also serve as a hedge against inflation as usually, real estate values, as well as rents, increase with inflation. However, investing in real estate is not that simple as it entails huge capital commitment and high transaction costs.
6. Commodity Trading Commodity trading involves buying and selling primary products, such as food, metals and energy. It is mostly undertaken on contracts based on such commodities. One of the most frequently traded commodities in India is gold. The best part about gold is that it is an international monetary asset, whose quality and value can be objectively measured.
7. Money Market Instruments Money market instruments are short-term, highly liquid financial products like Commercial Papers, Treasury Bills, etc. They are traded over-the-counter and cannot be directly purchased. They must be traded through certified brokers or money market mutual funds. The degree of risk is inconsiderable; however, their interest rates are also low.

Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Each investment option has its pros and cons. One should consider their saving goals and risk appetite before choosing an investment avenue.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.