Here is an article for beginner investor to understand best investing instruments. the information on this article on various investment avenues for beginner investor to select and allocate a right proportion to his portfolio to make it well diversified. This will help you to define various investment forms of each instruments, how to buy those and benifit of investing in each. Read further…
1. Equities or Stock
What is Equity? Equities are securities which represent ownership of a part of a company. Stocks/shares of the company, equity mutual funds all are in the same class.
How to buy? A. You can receive equities of a company through Initial Public Offers (IPO), B. Buy from stock exchange i.e. secondary market using a trading account, C. Through company stock option plan, D Subscribing equity mutual funds from mutual fund houses
What is the benefit? Equity performance is generally volatile in nature. Equities are the best asset class to yield the best returns on longer term horizons. Equities are not idea for short term investors. An investor required to timely monitor the stocks performance to get desired result.
2. Fixed Income Securities or Debt instruments
What is Fixed Income Securities or Debt Instruments? Securities that generate fixed set of returns in a period of time will come under this group. This can be in the form of interest, dividend income etc. government and company bonds, bank or company fixed deposits, other government securities all are in this asset class.
How to buy? Can be invested through corporate bonds, debt mutual funds, bank fixed deposits and post office schemes
What is the benefit? This is considered the safe mode of investment. This is the best instrument for a defensive investor who doesn’t have risk taking capacity. Debt instruments are also good for investors to shield there stock portfolio. Yields can vary depending on the prevailing interest rates and general economic conditions.
3. Real Estate
What is Real Estate? Represent ownership of land, houses or commercial property.
How to buy? Real estate generally acquired through inheritance, or from open market by purchasing house, land or commercial properties. Investment in real estate also can be done through Real Estate funds which known as REIT (Real Estate Investment Trusts). Read about real estate investment and REIT .
What is the benefit? A prudent investment in real estate can yield super returns. With the capacity of beating inflation, real estate investment allocation in each portfolio with long term focus, is highly recommended.
What is Gold? Gold is the most wanted precious metal. Gold can traditionally brought as jewelry. It can also buy in the form of coins, bars, biscuits for investment purpose.
How to buy? Gold can be purchased from jewelleries and from banks. Once can purchase gold through investing in commodities, through Exchange Traded Funds or known as Gold ETF’s and from gold mutual funds.
What is the benefit? Gold has capacity to beat inflation like real estate investments. Its value will not affected by stock market fluctuations or currency fluctuations. Generally, intelligent investors allocate gold in the investment portfolio as a best tool to hedge against huge market volatility. Long term investment in gold is best to yield huge returns. Read about the investments that can beat inflation.
What is Commodities? Generally any tangible thing that can be bought and sold, considered as commodities. Some of the commodities are agro products, precious metals, base metals, ferrous metals, energy products, trading through a commodity exchange.
How to buy? Commodities can be bought and sold through a commodity exchange in the country.
What is the benefit? Commodity trading is an upcoming phenomena. Commodities are in the high risk class. Any one dealing with commodities required to acquire enough knowledge and support to add commodities in the investment portfolio.
As a beginner investor, the above mentioned instruments are best to build a safe but high profitable investment portfolio.Remember, a portfolio doesn’t mean any one of the above investment but, it should have proper allocation of various investment instrument in the right proportion. Designing a portfolio required well understanding on your investment goal, age and risk taking capacity.
As a new investor, it is always advisable to seek proper advise from approved and certified financial planners who has years of successful financial planning experience. Here is an article on top 10 qualities required by a good financial advisor
Best wishes to those who plan to build and maintain a good portfolio for there life.