Types of Investment options in India
Grey haired or not, there’s never a bad time to start investing and especially in the current scenario when inflation is rising with a never seen pace, you need to keep a good track of investment opportunities around you. Well, to your rescue we are here with some good investment options that are available in India.
Two very simple and vastly practiced ways of investing money are:
Where your money attracts money- Eh, what? Yes, you heard it right. You always have an option to lend money to someone or some organization for some fixed amount of time at a pre decided interest rate so that when your money will be back to you, it won’t be the same, you will also be receiving the interest on that money.
Buy something that could do wonders- Yes, sounds magical, but industry of real-estate and few commodities are actually known to do wonders. You never know, your investment may touch the sky overnight. For this, you need to follow trend of a particular industry and cash in when it looks like it will be the best time for investment.
There are then very specific investment options which have been proved very effective among masses like:
Fixed Deposits: There stands no chance that you haven’t heard of FD’s yet. FD’s are the best thing for both short term and long term investment. Our parents have trusted all their life in FD’s and there is a reason to it. FD’s are safe investment as they are made to the banks and bank will be liable to pay our dues so this has stood out as a safe investment.
IPO (Initial Public Offering): This can actually be a game changer if you what you are looking for? If you are a stock exchange guru or have the potential to work wonders at stock exchange then you can turn your money into piles of money and more. A good understanding of the market conditions and the potentials of the upcoming companies can actually make your investment rich.
Gold: It’s not just about the lustre, it’s the value beneath. Well with this increasing inflation at the international market every day, even the prices of gold is touching the sky and those who have invested in gold long before are living a lavish life today. Investment in gold needs time and patience, also you need to know the market conditions of both domestic and international market. Price of gold keeps on fluctuating and one can easily make money if he knows the right time to invest in.
Bonds: If you are hesitant about entering the Share market then please face this side. Bonds are safe investments and in fact some bonds are controlled and regulated by govt. so that makes it all the more attractive and a safe investment. Investment in bond is usually done for long period of time like 10 to 20 years but they fetch very good rate of return, as high as 7-8% on your investment.
Mutual Funds: Confused between Bonds and Shares, we know just your kind and have something for you. Mutual funds are for those who are willing to take a calculated risk, somewhere mutual funds are a good mix of both risk and safety. Mutual fund is a balance of risk and return. Mutual fund is a well managed scheme where their team of professional make a basket of different instruments like shares, bonds, debentures and that basket of diverse instruments brings the highest returns.
In the field of finance, compounding is known as the source of generating earnings and these earnings are later reinvested to produce their own earnings. Compounding is just another form of producing earnings from earlier earnings. Its practical usage is not limited to only specific sector but it is applied in almost all the commercial sectors.
It is also known as compounding interest due to the earnings which are generated monthly, quarterly or semi-annually. Its process is like that of a continuous compounding in which any interest earned immediately begins earning another interest. The greatest scientist Albert Einstein once said that compounding is the greatest mathematical discovery of all the times. Moreover from interest on bank loans to company’s debts, compounding interest is applied everywhere.
The biggest advantage of compounding is that it can convert the working money of any person into a strong income generating tool. It is a type of process through which anyone can earn profits in form of interest from reinvested earnings. It is the amalgamation of reinvestment of earnings and time. It is believed that those set of persons who are able to afford more time to their investments are able to regenerate more potential income.
In other words, compounding increases the growth of working money by maximising the earning potential of investments.
Compounding frequency is another constituent of compound interest in which the repetitive frequency about the accumulated interest is calculated. The compounding’s effect depends upon the nominal interest rate which is applied and on compounded frequency interest.
For comparing the interest-bearing financial instruments, financial analyst use the approach of nominal interest rate and the compounding frequency rate. From the outlook of many financial experts, nominal interest rate cannot be directly compared with different compounding frequencies. The procedure of compounding interest also assist a consumer in comparing retail products more fairly. The interest is also considered as annual percentage rate (APR), annual equivalent rate (AER), effective interest rate and other terms.
How is interest compounded?
The first and foremost thing for investors is to understand the time value of money and in knowing how the exponential growth created by compounding can optimize their income and wealth allocation. The principle of interest works on one formula that a dollar today is worth more than a dollar in the future.
Time Value of Money
Understanding the time value of money and the exponential growth created by compounding is essential for investors looking to optimize their income and wealth allocation. This entire concept is known as the time value of money and discounted cash flow analysis (DCF) is just another component of it.
Even the investors who can purchase zero-coupon bond are also able to experience compounding interest. In the times of today where fluctuations in the market are high, many underdeveloped nations have been able to flourish because of the inclusion of compounding techniques in their business. Several compounding techniques including discounting cash flow analysis have helped many money lenders as well as investors to gain better profits.
At last, compounding has aided many banks, finance institutions facing financial crises.
In the year 1988, the government of India established a non-statutory regulatory body known by the name of The Securities and Exchange Board of India. But in the year of 1992 on January 30 it was given the statutory powers when the Parliament of India passed Securities and Exchange Board of India Act. Headquartered in Mumbai at the business district of Bandra Kurla Complex. Over the years its branches have been spread to many different cities like New Delhi, Kolkata, Chennai and Ahmedabad. Whereas it’s small branch offices are located in Bangalore, Jaipur, Guwahati, Patna, Kochi and Chandigarh.
The organisation is run mainly by its own members which consist of the chairman who gets elected by the President of India. It also consist of two officers from the Union Finance Ministry, one person from the Reserve Bank of India and five persons who get elected by the Parliament.
The main objective of SEBI is to protect the interest of investors in securities and regulating the market conditions that can favour the concerned people. According to the terms of its contracts its responsibility lies in safeguarding the interests of three main groups like issuers of securities, investors and market intermediaries. The organisation is known for holding judicial powers as it drafts regulations and statues in its legislative capacity. It is also known for conducting investigation and enforcement action within its administrative powers.
The statutorily regulated body of India (SEBI) is also criticised by many people because it inner-working is shielded from direct accountability to the public. Only Securities Appellate Tribunal is one such organisation that keeps a check on its power. Its panel consist of three judges who can make a direct appeal to the people of India.
Remember the time of Great Recession of 2008 and the biggest scam held by the company naming Satyam Fiasco. It was only the SEBI that took regulatory steps in mitigating the effects of these problems by passing some concrete steps to make sure that these problems do not occur again. Thus, this was the probably most extreme step of SEBI in stabilising the economy of India.
The powers of SEBI is not only limited to one but it has many starting from the authority of intervene in inside trading to imposing of monetary penalties.
Power relating to market-intermediaries
During the time of inspection and scrutiny, it can ask for information related to the business transaction from the stock exchanges and intermediaries.
Power to Impose Monetary Penalties
In case of any kind of violation made by the capital market intermediaries or other participants, it can impose monetary penalties on them.
Power to issue certain guidelines
As the rules of SEBI has strictly stated that it works in safeguarding the interests of investors which implies that it can issue certain guidelines to intermediaries on which they need to work. It can also regulate the functions of merchant bankers or insider trading.
The working of this organisation has not only created a uniformity in Indian market but has also created the transparency in the organisation.