Investments

1. Mutual Fund

A mutual fund is a common pool of money in to which various investors with common financial goals or investment objective place their contributions that are to be further invested in accordance with the stated investment objective of the scheme. The investment manager or fund houses invests the money collected from the these investorsr in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund will invest into equity and equity related instruments and a debt fund will invest in Govt securities, bonds, debentures, gilts etc.

There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK and now also in India is the range of benefits they offer, which are unmatched by most other investment options.

  • Affordability

    Investing into equity otherwise needs huge money, a mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. This amount today will not even buy you once share of a decent scrip. Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.

  • Diversification

    Its normally said one should not put all eggs in one basket, It simply means that one must spread his/her investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (Cement, Auto, Power, IT, FMCG, Infra etc.). This kind of a diversification may add to the stability of the returns that your hard earned money deserves, for example during one period of time equities might underperform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets.

  • Variety

    Qualified investment professionals who are expert in the field and have in depth knowledge of market maximize returns and minimize risk by monitoring investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional who has experience in making investment decisions. One may manage few thousands by his/her expertise but a group of Fund Managers manages funds to billions hence there is all possibility of better expertise at all the times.

  • Tax Benefits

    There are various options available in mutual funds to save tax, even Govt of India has announced specific tax saving schemes restricted to a particular amount.

  • Regulations

    Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors

Benefits of Open-ended Schemes
  • Liquidity

    In open-ended mutual funds, you can redeem all or part of your units any time you wish. Some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period.

  • Convenience

    An investor can purchase or sell units directly from a fund, through a broker or a financial planner. The investor may opt for a Systematic Investment Plan termed as SIIP in monthly easily payable installments. In addition to this an investor receives account statements and portfolios of the schemes.

  • Flexibility

    Mutual Funds offering multiple schemes allow investors to switch easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time.

  • Transparency

    Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the know of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the investment manager.

2. Real Estate

At SaveFirst we suggest not to keep all eggs in one basket and keep any eye on green sectors that yield high returns for your hard earned money. Real estate is is another booming and high yield sector.

The Indian economy and the real estate sector in particular are high on its ride to prosperity. As India’s economic growth curve rises, real estate India has emerged as one of the most appealing investment areas for domestic as well as foreign investors. Indian real estate has huge potential demand in almost every sector, but especially commercial, residential, retail, industrial, hospitality, healthcare etc. But maximum growth is attributed to its growth from the booming IT sector, since an estimated 70 per cent of the new construction is for the IT sector.

Investment scenario has certainly undergone a paradigm shift in India. Gone are the days when potential investors used to sought after investment options like equity bonds and park money in shares where your return ranges between 5.55 to 6%. Data showcased by property surveys show that returns from rental incomes on investment in commercial property in Indian metros, is around 10.5%, the highest in the world.

Key Facts
  • Selling and buying Indian property is now considered as the most profitable and attractive business opportunity in the present real estate scenario in India. New demands have added to strength of real estate markets across the commercial, residential and retail sectors in India. Not surprisingly, demand for Indian property has been increasing steadily for the past few years and it has exceeded supply.

    There has also been an upward swing on the real estate price values in the recent years. Due to the huge demand and rising prices, investment and speculative interest in real estate is growing while excess money supply, stock market gains and policy changes are adding to the trend in favor of the real estate sector.

  • India has a distinct regulatory and financing management in place.

  • Real estate boom in India is supported by its own flourishing economy on a sustainable basis. Here, growth of the property market is not a result of renovation and overhauling; but rapid development that witness for India riding the high growth wave.

  • Its not that real estate boom is finding its place in metros like Mumbai, Bangalore, Delhi or Gurgaon only but places like Jammu, Kanpur, Jalndhar, Vijaywada, Nagpur, Rajkot and small towns like Kathua, Pathankot, Moga, Satna, Bagalpur have fuelled the growth even better.

Factors Favoring Investments

Tremendous growth has been taking place in both residential as well as commercial segments that is attracting huge investments phenomenal price escalation (more than 100% in several places) in last couple of years. Lower interest rates, easy availability of housing finance, burgeoning income and better job prospects, increase of nuclear families have given a boost to the demand for residential properties in India. The net yields (after accounting for all outgoings) on residential property are currently at 4-6% p.a. However, these investments have benefited from the improving residential capital values. As such, investors can count on potential capital gains to improve their overall returns. Capital values in the residential sector have risen by about 25-40% p.a in the last 2 years. The retail market in India has been growing due to increasing demand from retailers, higher disposable incomes and opening up of FDI in Retail. The capital appreciation in this sector is close to 20-35% p.a. However, the risks associated with this sector are higher as retailers are prone to cyclical changes typical of a business cycle. Changing consumer behavior combined with increasing disposable incomes will ensure further growth of the retail sector in India. In the present day scenario, if there is any powerful investment tool that brings burgeoning financial returns, it is INDIAN REAL ESTATE!!! Investors should consider the parameters minutely and meticulously to find out why investing in Indian real estate now is the best viable option.

3. Gold

Why Invest In Gold

“…gold and economic freedom are inseparable. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. Gold stands as the protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” Alan Greenspan, “Gold and Economic Freedom”,The Objectivist, July 1966.

Yellow metal as its common name suggests has emotional as well as sentimental values for we Indians. Analyst suggest that if India continues on its current high-growth path, over the next two decades the Indian market will undergo a major transformation. Income levels will almost triple, and India will climb from its position as the twelfth-largest consumer market today to become the world's fifth-largest consumer market by 2025.

Gold as an investment as found its strong presence even before investing in property. Over last 7 years, gold rates have seen substantial rise, considering international trends and economy movement its but natural that gold will increase it importance among middle calls and higher calls many folds. Having ornamental importance, gold will always be preferred as investment heaven because of its increasing demand and easy liquidity.

As Indian incomes rise, the shape of the country's income pyramid will also change dramatically. Over 291 million people will move from desperate poverty to a more sustainable life, and India's middle class will swell by more than ten times from its current size of 50 million to 583 million people. By 2025 over 23 million Indians—more than the population of Australia today—will number among the country's wealthiest citizens Indian spending patterns will also evolve, with basic necessities such as food and apparel declining in relative importance and categories such as communications and health care growing rapidly.

4. Equity

The Indian Equity Market is more popularly known as the Indian Stock Market. The Indian equity market has become the third biggest after China and Hong Kong in the Asian region. According to the latest report by ADB, it has a market capitalization of nearly $600 billion. As of March 2009, the market capitalization was around $598.3 billion (Rs 30.13 lakh crore) which is one-tenth of the combined valuation of the Asia region.

The Indian equity market depends on three factors -

  • Funding into equity from all over the world
  • Corporate houses performance
  • Monsoons

The Indian market has 22 stock exchanges. The larger companies are enlisted with BSE and NSE. The smaller and medium companies are listed with OTCEI (Over The counter Exchange of India). The functions of the Equity Market in India are supervised by SEBI (Securities Exchange Board of India).

Though investments in equities are termed as risky in nature but for decades now long term investors have made money in equity at an annualized return of over 15%. It is only after making a clear understanding & taking professional advice one should jump into equity based on long terms gains.

5. Debt

Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of bonds. These markets are important source of funds, especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries, debt market in India is also considered a useful substitute to banking channels for finance.

The most distinguishing feature of the debt instruments of Indian debt market is that the return is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed as the 'coupon rate' or the 'interest rate'. Indian debt market can be classified into two categories:

Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are being taken by the central and state government. It is also the most dominant category in the India debt market.

Bond Market: It consists of Financial Institutions bonds, Corporate bonds and debentures and Public Sector Units bonds. These bonds are issued to meet financial requirements at a fixed cost and hence remove uncertainty in financial costs.

The biggest advantage of investing in Indian debt market is its assured returns. The returns that the market offer is almost risk-free (though there is always certain amount of risks, however the trend says that return is almost assured). Safer are the government securities. On the other hand, there are certain amounts of risks in the corporate, FI and PSU debt instruments. However, investors can take help from the credit rating agencies which rate those debt instruments. The interest in the instruments may vary depending upon the ratings.

Another advantage of investing in India debt market is its high liquidity. Banks offer easy loans to the investors against government securities.