5th Episode : STOCK MKT

Types of Investments

There are many ways to invest the money, which are different from each other depending on there on risk factor and returns they provide.

To know which investment options are suitable, one has to find the characteristics and other details of those investments methods. 

Mainly you can invest in Bonds, stocks, Mutual funds, Futures, Gold, Real Estate, Forex etc

Let’s study one by one so that at the end of this chapter one should be able to find which investment option suits best for him.

1. Bonds - 

A company needs fund to expand into new markets, new products etc, while government need money for everything from infrastructure to social programs. 

In such scenarios they issue BONDS. A bond is nothing more than a loan for which you are the lender (provider) and the organization that sells a bond is known as the issuer. 

Benefits - Company or government firms provide interest on bonds.

Who can invest in bonds? 

This is the safest and low returns of investment type. This type of investment is mostly preferred by persons who doesn’t wish to risk there money and expect low returns.

2. Stocks - 

Stocks are exactly opposite of bonds. Stocks will provide high returns with high risk.

If you buy some stocks then you will become share holder responsible for profit as well as loss for that company. 

If company makes profit then it may pay you back in terms of dividends, but it is not guaranteed.

Some companies reinvest the profit for further growth and expansion plans which will increase the stock price of that company. If the company makes loss then the stock price may come down.

3. Mutual Funds - 

Mutual fund consists of fund manager and investors. 

The fund manager collects the money from all investors and invest in stocks, bonds etc.

It is the decision and responsibility of the fund manager to invest your money and generate the profit from investments. 

As some part of your investment is done in stock market so risk factor is present. As the investment is done with highly qualified and experience person the risk is modera

4. Options and Futures - ( F & O )

These are high risk and high returns related investments.

This investment method is advanced, which requires good knowledge of stock market.

Note - If you are new to investment then you should first learn basics and start investing in such instruments. It is usually short term investment with high risk factor.

We wl learn in detail about it later on. 

It is clear from above description that which investment method includes what type of risk and what type of returns.

All of above if you take stock market and invest for long term in value and growth stocks then the returns will be excellent with low risk.

Benefits of Investing in Stock Market for Long term : 

1) Investing for long term in stock market consist of low risk with high returns, provided you invest in value and growth  stock. It is proved by many analysts and noted investors like Warren Buffet that value investing gives you excellent returns and also it is verified and confirmed by companies through there past annual reports and prices.

2) No need to worry for daily ups and downs in share prices or market volatility. 

3) No need to monitor daily share prices sitting hours and hours in front of stock market, watching news etc. It’s not required daily but periodically you can update yourself about your stocks through news etc to track your stock prices.