Various Avenues and Investments Alternative
Different avenues and alternatives of investment include share market, debentures or bonds, money market instruments, mutual funds, life insurance, real estate, precious objects, derivatives, non-marketable securities. All are differentiated based on their different features in terms of risk, return, term etc.
INVESTMENT AVENUES
Are you searching for investment alternatives to park idle funds? This article provides a comprehensive list of such investment alternatives. Investment in any of the alternatives depends on the needs and requirements of the investor. Corporates and individuals have different needs. Before investing, these alternatives of investments need to be analyzed in terms of their risk, return, term, convenience, liquidity etc.
EQUITY SHARES
Equity investments represent ownership in a running company. By ownership, we mean share in the profits and assets of the company but generally, there are no fixed returns. It is considered as a risky investment but at the same time, they are most liquid investments due to the presence of stock markets. Equity shares of companies can be classified as follows:
Blue chip scrip
Growth scrip
Income scrip
Cyclical scrip
Speculative scrip
DEBENTURES OR BONDS
Debentures or bonds are long term investment options with a fixed stream of cash flows depending on the quoted rate of interest. They are considered relatively less risky. An amount of risk involved in debentures or bonds is dependent upon who the issuer is. For example, if the issuer is government, the risk is assumed to be zero. Following alternatives are available under debentures or bonds:
Government securities
Savings bonds
Public Sector Units bonds
Debentures of private sector companies
Preference shares
MONEY MARKET INSTRUMENTS
Money market instruments are just like the debentures but the time period is very less. It is generally less than 1 year. Corporate entities can utilize their idle working capital by investing in money market instruments. Some of the money market instruments are
Treasury Bills
Commercial Paper
Certificate of Deposits
MUTUAL FUNDS
Mutual funds are an easy and tension free way of investment and it automatically diversifies the investments. A mutual fund is an investment mix of debts and equity and ratio depending on the scheme. They provide with benefits such as professional approach, benefits of scale and convenience. In mutual funds also, we can select among the following types of portfolios:
Equity Schemes
Debt Schemes
Balanced Schemes
Sector Specific Schemes etc.
LIFE INSURANCE AND GENERAL INSURANCE
They are one of the important parts of good investment portfolios. Life insurance is an investment for the security of life. The main objective of other investment avenues is to earn a return but the primary objective of life insurance is to secure our families against unfortunate event of our death. It is popular in individuals. Other kinds of general insurances are useful for corporates. There are different types of insurances which are as follows:
Endowment Insurance Policy
Money Back Policy
Whole Life Policy
Term Insurance Policy
General Insurance for any kind of assets.
REAL ESTATE
Every investor has some part of their portfolio invested in real assets. Almost every individual and corporate investor invest in residential and office buildings respectively. Apart from these, others include:
Agricultural Land
Semi-Urban Land
Commercial Property
Raw House
Farm House etc
PRECIOUS OBJECTS
Precious objects include gold, silver and other precious stones like the diamond. Some artistic people invest in art objects like paintings, ancient coins etc.
DERIVATIVES
Derivatives means indirect investments in the assets. The derivatives market is growing at a tremendous speed. The important benefit of investing in derivatives is that it leverages the investment, manages the risk and helps in doing speculation. Derivatives include:
Forwards
Futures
Options
Swaps etc
NON-MARKETABLE SECURITIES
Non-marketable securities are those securities which cannot be liquidated in the financial markets. Such securities include:
Bank Deposits
Post Office Deposits
Company Deposits
Provident Fund Deposit
Author: sanjay bulaki