Investments

In finance, investment is the application of funds to hold assets over a longer term in the hope of achieving gains and/or receiving income from those assets. It generally does not include deposits with a bank or similar institution. Investment usually involves diversification of assets in order to avoid unnecessary and unproductive risk. In contrast, dollar (or pound etc) cost averaging and market timing are phrases often used in marketing of collective investments and can be said to be associated with speculation. Investments are often made indirectly through intermediaries, such as pension funds, banks, brokers, and insurance companies. These institutions may pool money received from a large number of individuals into funds such as investment trusts, unit trusts etc to make large scale investments. Each individual investor then has an indirect or direct claim on the assets purchased, subject to charges levied by the intermediary, which may be large and varied. Four most commonly used investment objectives are Capital Preservation, Income, Growth & Speculation: 1) Capital Preservation: A conservative investment strategy characterized by a desire to a avoid risk of loss. 2) Income: Strategy focused on current income rather than capital preservation. 3) Growth: Investing in securities with strong earnings and/or revenue growth or potential 4) Speculation: Taking a larger risk, usually by frequent trading, with hope of higher than average gains. These investment objectives relate to risk levels. The risks are going higher from 1 to 4 and also the same with the investment return. Investment Alternatives/ Types: Non Marketable Financial Assets: a) Bank Deposit. b) Post Office Deposit. (c) Company Deposit. d) P.F Equity Shares: These shares represent ownership capital. As an equity share holder a person have ownership stake in the company. That having the residual interest in income and wealth. So these can be catagorised as: a) Blue chip shares. b) Growth shares. c) Income shares. d) Cyclical shares. e) Speculative shares. Bonds: Long term debt instruments. For example Govt securities, Savings bonds, Govt agency securities, PSU bonds, Debentures of private sector Companies and Preference shares. Money Market Instrument: Debt instruments which have a maturity of less than one year at the time of issue are called money market instrument. Like Treasury bills, Commercial Paper, Certificates of deposit Mutual Funds: It is a fixed income securities. There are three broad types of mutual funds schemes: a) Equity schemes. b) Debt Schemes. c) Balanced schemes.

Life Insurance: This is also viewed as an investment. Premiums represent the sacrifice and the assured sum the benefit. There are following polices in India: Endowment assurance policy, whole life policy, Money back policy and term assurance policy. Real Estate: The most important asset in the investors portfolio is a residential house . Maximum of the investors are likely to be interested in the real estates like: Agriculture land, semi urban land, Commercial property. Precious Objects: These are generally small in size but highly valuable in monetary terms. These are may be gold and silver, precious stones and art objects. Financial Derivatives: It is an instrument whose value is derived from the value of an underlying asset. It may be viewed as a side bet on the asset. These derivates may be: Options and Futures.