Guidelines to Investing For Beginners in India

Guidelines to Investing For Beginners in India

“Money doesn’t grow on a tree!”

Heard that before? Of-course you have! As a matter of fact, if you belong to the average-middle-class-majority of India, then this has to be one of the those irresistible lines that you’ve heard of the most throughout your life whenever you wanted to stretch the monthly family budget a bit. Well, as true this statement might literally be; it has definitely lost its charm (and significance for that matter) over the past few decades. In fact, with the prevailing socio-economic uplift of India, it is easier than ever to make your money work for you and enjoy gargantuan returns. So, if you are new to investing, yet looking forward to make some easy money; you’ve come to the right place. We have intentionally developed this and a series of few up and coming articles to serve as the beginner’s guide to investing. These articles will guide you through the twists and turns of the Indian financial pathway to ‘earning huge by investing right’.

There are a lot many ways to make your money work for you, nonetheless, we’ll be giving you a glimpse the best investment strategies for beginners.

Stocks

stock market in India
stock market in India

Stocks refer to a type of security that justifies ownership in a company and represents a claim (for the stock holder) on a part of the company’s assets. Stocks can be distinguished into two categories i.e. common and preferred stocks. Holders of common stock(s) own a right to attend vote in the stakeholder’s meetings receive dividends if and when declared. In the other hand, holders of preferred stock(s) do not enjoy any voting rights but a higher claim on the company’s assets and earnings. You can purchase stock by registering yourself with some licensed brokerage firm or through an online app. All by yourself or with the assistance of a professional stockbroker.

Bonds

Bonds are typical financial debt instruments that allow an investor to lend money to a company or organization and gain periodic interests along with the claim of the principal amount upon the time of maturity. Bonds can be issued by corporations and/or the government and like stocks can be acquired as new offerings or within the secondary market. The interest earned on most bonds is completely taxable, however, with an exception to a few bonds issued by the Government backed entities. Tax free bonds have gained great popularity amongst the investors because of the taxation benefits they exhibit.

Mutual Funds

Mutual Funds refer to a type of investment scheme that involves an asset management company accumulating money from several investors so as to invest it upon several professionally monitored and diversified financial securities like stocks and bonds, thereby generating eventual profits. Mutual Fund investments have recently gained much popularity amongst the Indian investors because of their tendency to offer diversified investment options, thereby, usually fetching the investor better returns at a declined risk rate. Mutual Funds can be purchased directly through your bank or other asset management companies and also through your Demat and online trading account.

ETFs

ETFs or Exchange Traded Funds refer to a type of marketable security that is listed and traded on exchanges similar to stocks. These funds experience multiple price changes throughout the day as they are bought and sold several times. ETFs have globally introduced a completely new perspective of investment for the Retail and Institutional Money Managers. You may think of the ETFs as type of Mutual Fund (not literally) that you may buy and sell in real time at the trade exchanges in a price that keeps on changing throughout the day. However, unlike Mutual Funds, ETFs offer higher liquidity at a much lower service charge.

Alternative Investments

There are several investment options other than Stocks, bonds, Mutual Funds and ETFs that fetch a considerably good amount of return. Some of these investments are:-

Real Estate Investments

Real Estate investments can be made by directly purchasing a commercial or residential property so as to sell at an elevated price thereby, gaining a surplus return all at once or use for renting purposes to fetch small but regular returns. This is usually considered a safe investment albeit the legitimacy of the property must be cross-examined before purchasing.

Peer-to-Peer Lending

Peer-to-Peer Lending
Peer-to-Peer Lending in India

This is an old but effective way of investment that usually allows the investor to lend any amount of money to an individual or a group of individuals of known identity. This is usually considered a secure investment considering the fact that the money lent to the people have a good credibility as in front of the lender. However, the conventional ways of Peer-to-Peer lending has been evolved with the evolution of communications technology. Today, we have professional communities set up that allow the investors to invest as much money they want to a group of verified creditworthy borrowers, thus making this whole investment procedure even more secure and easy. One of such communities is Lendbox which is India’s leading Peer-to-Peer marketplace that connects high quality creditworthy borrowers with smart lenders online.

There are yet many other ways of investing your money that fetches good returns, however the aforementioned list of investment are considerably the easiest to begin with. Stay tuned, as our upcoming articles will deliberately lay down detailed information on each of the aforementioned ways of investment.

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