A different form of stress comes with the completion of an educational degree. Most graduates in professionals streams look towards a good job as the ultimate reward for their efforts. Landing a plum job in a reputed multinational company is a dream of many graduates and postgraduates across the country. It is often the first step towards your freedom. Unfortunately, one of the imperative consequences of growing up is being responsible for your own money. And it takes ages to understand the way money works. We shall help you understand the investment options in the Indian market.
There are multiple options available to those who are looking to put a portion of their money into something that will grow periodically. A few of these options (and the most viable ones), are Mutual Funds, Gold ETFs, and the stock markets.
Stock Markets: What are they?
Quite simply put, a stock market is a marketplace for buying and selling of company shares, stocks, and derivatives. A company divides the capital that it has into many small, finite portions and each of those is called a share. Please note, the words stocks, equities, securities, and shares stand for one and the same thing and are just business jargon.
When you invest in a company by buying the shares of a company, you are investing in the growth of the company. Hence, as the company grows, the value of your shares also grow, and vice versa. At the end of each financial year, a dividend is paid by the company, at a certain rate of return to all its shareholders. While many people will say that investing in stocks and shares is risky, the cumulative value of shares does tend to rise over time, even though individual share costs may fall, and thus it is a great way of increasing your money capital. One can invest in the stock market by creating a demat account, mandated by the government of India.
Most of us cannot keep following the stock markets with a hawkeye. Hence, to do trading on the stock market, it makes sense to invest in a mutual fund. Mutual funds are managed by professional entities like banks. They invest your money, and quite simply, keep a share of the return as commission while the bulk of the return comes back to you.
In addition to the benefits of time and ease, there is the tax benefit that is added, with investments that have been held for twelve months or more are calculated as capital gains and are taxed according to that scenario.
You can check all types of mutual funds here – Mutual Fund Categories
Gold: How and Why?
Investing in gold might sound risky, but it is a good hedging tactic against inflation. Over a period of time, the return obtained on a gold investment is proportional to the rate of inflation. Moreover, gold is inversely related to equity investment options. When stocks perform poorly, gold performs well. It is a good idea to buy gold at the first signs of an economic downturn. Gold ETF, or Exchange Traded Fund, is a like mutual fund, which invests gold as units instead of currency. This is listed on the stock markets.
We have given you a very basic introduction to how one should start investing. However, for a more thorough understanding, one must try and keep abreast of all developments in the personal finance sector.
There are multitudes of options available for those who have started working recently and are looking for intelligent investment options for their hard earned money. Three of those options are stock markets, mutual funds, and Gold ETF. This article provides a brief introduction to each.