Avenues for investing in Indian securities markets: A guide for retail investors
Each investment alternative has its own strategies and weaknesses. Some options seek to
achieve superior returns (like equity) but with corresponding higher risk. Other provide
safety like PPF but at the expense of liquidity and growth. Other options such as FD’s offer
safety and liquidity, but at the cost of return. Mutual funds seek to contribute the
advantages of investing in arch of these alternatives while dispensing with the
shortcomings. Indian stock market is any efficient by nature and, is considered as one of the
most respected stock markets where information is quickly and widely disseminated
thereby allowing it securities price to adjust to rapidly in an unbiased manner to new
information so that, it reflects the nearest investment value.
There is no unanimous meaning among different scholars for the word ‘Investment’ in
different period. Generally investment is the employment of funds with the purpose of
earning additional income or capital appreciation.
Nowadays third world countries like India face great challenges for finding sufficient capital
for its development. As far as Indian economy is concern, which characterised by low
income, low savings, low investment, low employment, etc. In this context, Government
faces great difficulties for collecting capital for its developmental purpose. For finding
sufficient capital, Government of India takes so many measures in joining with banking
institutions in our country. Moreover, Government take measures for improving the saving
habits of people especially in rural area. In the present scenario, our Government takes a
footstep for converting our economy into cashless economy by the way of informing the
digital awareness and its position impact towards the society and to promote digital
transactions instead of physical supply of money. As the result, Indian economy slowly
shifted to digital economy by the way of creating various investment avenues.
“Bottoms in the investment world don't end with four-year lows, they end with 10 or 15
year lows.”
Investment avenues refer to the different alternatives, through which a person can
channelize his money at profitable manner. For a person, who can invest his money in real
investment, gold/silver, bank deposits, share & securities, mutual funds, insurance,
government securities, post office savings, provident funds etc. However, Investment
avenues are not free from all defects. Each avenue carries its own merits and demerits.
These results investors face so many problems while executing their investment such as;
Misrepresentation about investment avenues, Delay in redemption request, High volatility,
Political changes, High inflation, Untimely investment etc. Hence the study also covers the
areas of problems faced by salaried group of people while making their investments.
Most of the people keep aside a part of their income as savings. On the other end,
Investment is the act of investing the saved money in to financial products with a view to
generate income from future. In short, when a person has more money than he requires for
current consumption, he would be coined as a potential investor.
Investment scenario as a banyan tree which growing day by day, by the way of introducing
new investment avenues with unique features to attract investors in to the world of
investment.Investment avenues are the different ways that a person can invest his money.
It also called investment alternatives or investment schemes.
There are different methods are available to classify the investment avenues.
Some of the methods are as follows- physical investments and financial investments
Physical investment is the investment in physical or capital goods such as plant and
machinery, motor cars, ships, buildings, etc.
The major physical investments are as follows;
REAL ESTATE:Real estate is basically defined as immovable property such as land and
everything permanently attached to it like buildings. Real property as opposed to personal
or movable property is characterised by the right to transfer the title to the land whereas
title to personal property can be retained. It is true to say that real estate offer a rate of
return which is superior to avenues such as company deposits on a long term basis. The
investment in real estate essentially depends on the risks associated with it, and the
alternative investment opportunities.
GOLD AND SILVER:For ages, gold and silver have been considered as a form of investment.
They are considered as best hedge against inflation. This is a form of investment amongst
the rural and semi-urban population. Besides, investors tend to invest in jewelry instead of
pure gold. Gold has been used throughout history as money and has been a relative
standard for currency equivalents specific to economic regions or countries, until recent
times.
ART:Paintings are the most sought after form of art. The prices in the art market are rise is
expected to continue. The trend in the art market today is to invest in young upcoming
painters whose prices will soar over the years.
The major financial investments can be divided as follows
A: MARKETABLE INVESTMENTS (NEGOTIABLE SECURITIES):
These financial securities that are easily marketable and converted into cash in short time.
Such investments are also known as transferable investments.
EQUITY SHARES:These securities carry more risk than investing in debt instruments. There is
no assured return but when we invest in a share of company, we become an owner of the
company to the extent of the capital invested.
FIXED INCOME SECURITIES:
These are the securities which yield certain fixed income to a regular interval of time.
Securities which comes under this category as follows;
PREFERENCE SHRES:These are the shares which has some preferential rights. The charactors
of the preference share are hybrid in nature. Some of its features resemble the bond and
others the equity shares. Like bonds, their claims on the company’s incomes are limited and
they receive fixed dividend. At the same time like the equity, it is a perpetual liability of the
corporate.These holders do not enjoy any of the voting powers except when any dissolution
affects their right. Preference share also called ‘non-voting shares’.
DEBENTURES:It is a document issued by the company under its common seal for
acknowledgment of debt. There are somany types of debenture viz, Registered debenture,
unsecured debenture, convertible debenture, redeemable debenture etc. An investment in
debentures fetches a fixed and regular rate of interest.
BONDS:Bond is a long term debt instrument that promises to pay a fixed annual sum as
interest for a specified period of time. Generally, Debentures and bonds are one and the
same. Americans called ‘bond’, Europeans called ‘debenture’. In India, generally debt issued
by government known as bond, if it issued by private, known as debenture.
GOVERNMENT SECURITIES:The securities issued by central, state and quasi government
agencies are known as government securities or gilt edged securities. As government
guaranteed security is a claim on the government, it is a secured financial instrument, which
guarantees the income and capital. The rate of interest on these securities is relatively lower
because of their high liquidity and safety.
MONEY MARKET SECURITIES:These securities have very short term maturity say less than a
year.The common money market instruments are as under;
Treasury Bill (T-bill):It is basically an instrument of short term borrowing by the government
of India. T-Bill used by government to raise the fund to fill the deficit between the receipt
and expenditure. In India, RBI issued T-Bill on behalf of government. Generally its maturity
period is 91 days. Since the interest rates offered on the T-bill are very low, individuals very
rarely invest in them.
Certificate of Deposit (CD):Certificate of deposits represent a type of interest-bearing
deposit at commercial banks or savings and loan associations. CDs are next lower risk item
after T-bill. These are negotiable instrument which have maturity of 7 days 1 year. It is
mainly preferred by investors and companies rather than individuals. The minimum size of
the certificate is Rs 10 lakh. The additional amount is issued in multiples of Rs 5 lakh.
Commercial Papers (CP):These are the unsecured short term debt instruments issued by
credit worthy companies for meeting their short term liabilities. CP is the promissory note
with a fixed maturity period. They are negotiable and transferable by endorsement and
delivery. Its maturity period ranges between 7 days to 1 year.
SAVING CERTIFICATES:Purchase of saving certificate is another investment avenue popular
in today. The rate of interest and the maturity period are mentioned on the certificates.
There are tax benefits also in some certificates. The important saving certificates are;
B: NON MARKETABLE INVESTMENTS (NON NEGOTIABLE SECURITIES):
These are the financial securities which can’t easily marketable and converted into cash in
short time.
It includes following:
DEPOSITS:Deposits earn fixed rate of return. Even though, these are non-negotiable
instruments. Popular types of deposits are;
Bank Deposits:It is the simplest avenue open for the investors. Investor has to open an
account and deposit money. Banks maintain different type of accounts for receiving
deposits from every class of people. They are;
Post office Deposits:Like the commercial bank, post office also offers fixed deposit facilities
and monthly income scheme. The deposit has to be in multiples of Rs 50. The rate of
interest varies from 8.20 per cent for one year deposit to 8.50 per cent for five year deposit.
No withdrawal is allowed before six months. Interest is credited half yearly but paid
annually. These deposits can be pledged as security.
In the current scenario, investing is very important and investing in stock market is a major
challenge ever for professionals. The young people should start investing earlier so that they
can reap the benefits of investing in future. People should keep an eye open and keep
updating themselves about various investment avenues so that they can get safe returns.
“In the long run, it’s not just how much money you make that will determine your future
prosperity. It’s how much of that money you put to work by saving it and investing it. “
VRINDA SABOO
CONTACT NUMBER- 9754495555
MAIL- vrindasaboo23@gmail.com
