Investment ideas

Investment is very crucial if you want to have a secured future. Different people have different goals and time horizon for their investments. These goals can be short term, like buying a car, a foreign trip or long term like you may invest for your child's marriage, higher education or for your own retirement. 

Once you have identified your investment goals and the amount you want to invest, you need to find out the time horizon by which you would like to get the desired amount. 

Before starting the investment, you must find out your monthly expenses. The delta amount (delta = your monthly earning - your monthly expenses) which is left after your expenses should go towards your savings. You can use systematic investment plan (SIP), a proven methodology for your investments. If you want to do full justice to your investments, you have to be disciplined enough. You must put some money into your savings bank account to meet unexpected expenses or for some urgency as well.

I would like to share different financial investment instruments that we can use for our investments. After reading this post, what are your impressions and thoughts about his ideas and experiences?

Bonds, 

Mutual funds, 

Equity markets,

Investing in Commodities 

Investment into properties

I will try to explain the above financial instruments based on my personal experiences. 

1. Bonds

Bonds are loans from an institution. Bonds usually range from few months to a few years. Governments and big companies issue these bonds to raise cash. You will be paid interest for the duration of the bond period. Here rate of returns are usually better than bank deposits.

2. Mutual Funds

Mutual funds are usually pooled money handled by a fund manager or company. What the company does is to pool small amount of money from their investors make a big pool of cash which can be tens of millions of rupees. Depending on the mutual fund's portfolio, the all or the part of the pooled money is then invested in the highly volatile stock market. This is usually an exciting investment option for people who are in their 20s and 30s. I will discuss more on Mutual funds in my subsequent posts. 

3. Equity Market 

You can also buy equity (shares) of a particular company you are interested in. If that company performs well in future, your money multiplies itself. On the other side of the coin, if that company fails to perform, you may end up loosing your entire capital. It is almost same as Mutual fund investments except for the fact that, in equity investment, you will be handling shares in your portfolio, whereas in mutual fund, it is the fund manager who does it. The 2 major stock exchanges operating in India are Bombay Stock Exchange (BSE also known as Sensex) and National Stock Exchange ( NSE also called NIFTY). Stock market is again extremely volatile. It is therefore extremely important for you to do a thorough analysis of the company before buying an stock from 

that company. If the analysis is not done properly, you may end up loosing you entire capital in no time. So be cautious here :-)

I will talk more on stock market, how to evaluate a particular stock of a company (i.e. if the stock is undervalued or overvalued) in my future post. This analysis becomes very handy while choosing a stock.  

4. Investing in Commodities

You can also bet your money in commodity market. By nature, commodity market is extremely volatile and you have to be extremely cautious while investing into commodities. There are plenty of reasons (political reasons, natural disasters, demand/supply etc) out there, which makes the commodities volatile. You can buy commodities of your choice (e.g. Gold, Silver) on a lower price (when demand is low) and sell them out on higher prices (when demand is high). The 2 main commodity exchanges operating in India are Multi Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX). There are lot more in Commodities, which I will discuss it in my future posts.  

5. Investment into properties

This is old and most proven technique for investment. In general, property cost increases year after a year. This can be a much safer investment option as compared to mutual funds, equity, commodities etc. One of the down side of property investment is that, you need a chunk of money to invest in property. 

However if you have less money, you can use other investment techniques discussed above.

For a safer investment, you should make a diversified portfolio.