INVESTMENT AVENUES

Shriyanshu Padhi

2012629

WHAT ARE INVESTMENT AVENUES?

Investment avenues are the different ways that a person can invest his money. It also called investment alternatives
or investment schemes.

WHAT ARE THE DIFFERENT TYPES OF INVESTMENT AVENUES?

PHYSICAL INVESTMENTS: Physical investment is the investment in physical or capital goods such as plant and
machinery, motor cars, ships, buildings, etc. The different types of physical investments are:-

 Real estate
 Gold , silver and platinum
 Art
 FINANCIAL INVESTMENTS: It means employment of funds in the form of assets with the object of earning additional income or
appreciation in the value of investment in the future. Assets which are the subject matter of investment may be varying between safe
and risky ones.
They are of two types :-
1. MARKETABLE INVESTMENTS –
 Equity shares
 Preference shares
 Government securities
 Bonds
 Debentures
2. NON MARKETABLE INVESTMENTS-
 Deposits
 Tax sheltered saving schemes
 Mutual funds
 Life insurance

Most investors want to make investments in such a way that they get sky-high returns as quickly as possible without the risk of losing
principal money. This is the reason why many are always on the lookout for top investment plans where they can double their money
in few months or years with little or no risk. However, a high-return, low-risk combination in a investment product, unfortunately,
does not exist. Maybe in an ideal world but not at present. In reality, risk and returns are directly related, they go hand-in-hand, i.e.,
the higher the returns, higher the risk and vice versa. Here is a look at the top 10 investment avenues Indians look at while saving for
their own financial and economical goals.

TOP 5 INVESTMENT AVENUES OF MY CHOICE

1.GOLD: One can buy gold in various forms- physical, paper or digital. Physical form is jewels, the paper form is gold bonds and digital
form is gold ETF (explained in point 6).
a) Gold bought for personal use is individual choice. However, gold bought for investments can be in any of the above mentioned forms.
b) Gold is often used to offset the risk associated with other investment options. For example, when equity, bond or real estate are in downward
trend gold acts as a hedge. In short, the value of gold is same globally. Therefore, it is sometimes used to offset the risks associated with equity
or bond markets.
c) Gold has not given the best return when one considers tenure of 20 years or more. It is recommended to have a limited investments exposure
in gold.

2.MUTUAL FUNDS: There are several types of Mutual Funds. Equity Mutual Funds, Debt Mutual Funds and Balanced Funds.
a) Equity mutual funds are those schemes that invest at least 65% of the corpus in stocks of Indian companies. These are volatile as most part of
the investment is in equity stocks which are subject to market risks.
b) Debt mutual funds are considered less volatile as compared to equity; however, there is always a risk in terms of interest rate. Most of these
funds invest in debt funds like government securities, corporate bonds, treasury bills etc.
c) Balanced funds have a balance mix of equity and debt. This to some extent cuts the volatility and balances the return as well.
d) Most of these funds are managed professionally by fund houses. There are policies and documents where one can see the profile of fund
managers and where the funds are invested.
e) For a long-term investor, the most suitable investment would be in equity based mutual funds. For investments above 5 years equity is the
only area where there is maximum return.
f) For those who have no expertise in stock markets or for those who do not have time to analyze the markets and invest periodically the best
way to invest in equity is through mutual funds.

3.BANK FIXED DEPOSITS (FD): According to me, this is most misunderstood investment avenue. In FD, we lock our funds for
a stipulated time, get minimal interest paid on we also pay tax on interest earned.
a) The duration of FD ranges from 7 days to 10 years (even more in some cases). One can choose any time range according to their choice.
Interest rate varies according to tenure.
b) FDs offer premature withdrawal options but with penalty. One should make a note of this with their bank at the time of opening the account.
c) FDs are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) rules. Under this, only up to Rs 1 lakh (principal plus
interest) is insured per person per bank.
d) Interest rates vary from 5% to 7% for tenures 1 to 10 Yrs. Senior Citizens get extra 0.5%
e) Bank FDs offer cumulative and non-cumulative options. In the cumulative option, the interest is re-invested and payable on maturity whereas,
in the non-cumulative option, interest is payable periodically (monthly, quarterly or annually depending on the bank).
f) Interest is added to your income and taxed as per your income tax slabs. Interest is subject to tax deducted at source (TDS)

4.Direct Equity: Investors who understand stock markets and are willing to take risks on their own can directly invest in Equity stocks of
several listed companies and create their own portfolio.
a) Direct equity investments are considered risky as they are subject to price fluctuation on stocks (volatility). This could lead to a capital loss in
case the stock picks are not efficient. One needs to devote time to learn and understand how stock market works, before investing their hard-
earned money.
b) Market knowledge is a must as tips can be a costly mistake.
c) There are domestic and global market conditions influencing stock prices. One needs to be diligent and disciplined while investing in equity
directly. If this is difficult to manage then one can choose to invest through mutual funds.
d) This is one of the BEST investments one could make in the long run. No other investment beats inflation as equity does. The value of Rs. 100
today is not the same as that was 10 years. Today we get far fewer items with the same amount. This is the effect of inflation.
e) Some stocks have given more than 100% return in the past 5 to 10 years. It takes a lot of patience and practice to get such returns but for those
who put in efforts it’s an ocean of opportunities.
f) WEALTH is created only by investing in equities over a long period of time which is over 10+ years.

5.Bonds: Investors can choose to invest in bonds issued by government of India.

a) The government issues several bonds with different interest rates and maturity periodically.
b) Bonds can be issues in material or dematerialised form. Material form is when a certificate of holding is issued as a proof of investment with
all the details. The dematerialised form is digital, and amount is sent to account directly.
c) Return on bonds is limited. If the investment is made in 7 years 8% bond, then the return is only 8% and not more.
d) This is considered less risky as compared to equity, however, there is interest rate risk associated .

Comparative study of the above investment avenues

Parameters Mutual Funds Real Estate Equity Bank Deposits Gold
 Very easy and
Quite easy. Once Fixed Deposit is a
you are KYC- great way to grow
You need a Demat The most direct
compliant, you can your savings with
The emergence of account and need to way to own gold
invest in mutual utmost safety. On
property portals has opt for the services of is to purchase
funds of your completion of the
made investments in real a stockbroker. The physical gold bars
choice.Pretty pre-decided tenure,
Ease of investment estate easy. However, stockbroker can or coins from a
straightforward. All your deposit starts
there are many legal either charge a flat known jewelry
you need to be is earning an interest,
nitty-gritty that you need fee or a certain shop. However,
KYC-compliant throughout the
to take care of. percentage for every pricing is not
and you can invest chosen duration, as
transaction. uniform. 
in mutual funds of per the interest rate at
your choice. which you locked in
your deposit.

Major banks publish

the interest rates on To buy gold, an
If you are opting
If you are using the their websites and investor should
for direct plans of
A beginner requires lots services of a anyone can know the timing,
mutual funds, you
of knowledge on the traditional broker, understand the carat etc. If
need to know about
types of properties, place you can expect returns. Fixed jewelry is bought
the markets. On the
Knowledge of the properties, future professional deposits provide as investment, the
other hand, for
required prospects etc. to get guidance. On the complete flexibility making charges
regular plans, there
maximum value other hand, for with regard to the (20-30%) form a
are professional
appreciation over the discount brokers, you tenure of investment. significant
fund managers to
period of time. need to do your The term of fixed expense which is
take care of your
research and analysis. deposits can vary not a viable
investments.
between 7 days to 10 investment.
years.

Highly liquid. You

If you have invested
can easily redeem Stocks and in a tax-saving bank Easy to liquidate,
when required.  marketable securities, deposit, you can’t however
You can easily A non-liquid asset. which are considered withdraw before the sometimes it
redeem your Money invested in real liquid assets because
Liquidity tenure ends. For becomes tough to
mutual fund and estate can’t be easily these assets can be regular deposits, you liquidate physical
the money is converted into cash. converted to cash in a can withdraw after gold for cash in
credited into your relatively short paying a certain short time
bank account the period of time in the penalty.
next day. event of a financial
emergency

Investments in
mutual funds are
subject to market
risks. Returns vary
depending on the
Fixed deposits are
type of fund and
one of the safest
market
investment option
Performance.
Involves high available for those
Returns are not You need to ensure that
levels of risks and people who don’t
fixed and being the builder has followed Safety issues: loss
unlike mutual funds, want to invest in high
market-linked the all the compliance and or theft of
Risks your investments are risk investment.
quantum of risk is the papers are in place. physical gold is
not diversified. Go However, an investor
high. However, If not, there could be possible
for it if you have a should do a through
mutual funds legal trouble.
high-risk appetite. check on the stability
provide
of the bank before
diversification that
opening any fixed
brings down the
deposit.
overall risks, and
with systematic
investment plans
(SIPs), the risk is
further spread out.

MY PREFERRED INVESTMENT AVENUE IS MUTUAL FUNDS.

As an investor to achieve my financial goals, I will invest in mutual funds due to following reasons.

There’s a Fund for Everyone: This could be one of the significant benefits of mutual funds. There are over 2,000 currently active
schemes -- a lot to choose from. You can find funds that match your risk appetite, investment horizons, and personal financial goals.
Diversified Portfolio: The primary benefit of investing in a mutual fund is that you get exposure to a variety of shares or fixed income
instruments. For instance, if you wanted to invest Rs. 1,000 directly in stocks, you would probably get only a share or two. If, on the other hand,
you invested through a mutual fund, you would get a basket of several stocks for the same amount.

Reduce your Tax Liability: Finally, one of the benefits of mutual funds is you can save income tax. If you invest in an ELSS fund, you
can reduce your taxable income by as much as Rs 1.5 lakh under Section 80C of the Income Tax Act - 1961.

Benefit from High Liquidity: If you invest in open-ended mutual funds (which most funds are), you can buy and sell your units at any
time. Your total redeemable or buyable value is based on the fund’s net asset value for that day.

You can Invest in Small Amounts: You can begin a SIP with as little as ₹500 a month. The advantage here is that you don’t have to
wait for

Invest in a Lumpsum or through a SIP: One of the advantages of mutual funds is flexibility. You can either make a lump sum
investment or put in small amounts over some time through a SIP (Systematic Investment Plan).

References and Links:

https://www.chitaleinvestments.com/top-7-avenues-of-investment-in-india/

https://www.growthmodule.com/investment-avenues/

https://m.economictimes.com/wealth/invest/top-10-investment-options/articleshow/64066079.cms