Investing is a very complicated topic, but most people start to learn about it when they are in college. The problem with the stock market is that it’s very hard to understand. You have to know a lot of things, like how to read a balance sheet, what stock options are and how to value them, and even what an option contract is. It is a shame that these things are not easy to learn for a beginner.
Nobody is looking to get rich overnight by investing in stocks. It is not about one day scoring big and getting rich. It’s about putting in the time and effort to learn about the market and understand what you are doing. Take time to learn about investing so you can truly understand it.
I was surprised at how incomplete the information is that we have on how to invest money. Most articles just point out investment opportunities and don’t tell us anything else about them.
People who want to learn about investment options need more information. Shares, for example, are an investment option. But how do you invest in stocks? Readers would like some help finding different alternatives to investing in stocks. This article is intended as a quick reference guide.
I created an infographic that clearly explains this concept. I hope that especially beginners can benefit from this form of explanation.
In general, people can keep mutual funds on their toes. The most commonly discussed alternatives are mutual funds, stocks, gold and real estate. This knowledge is not false. But with the help of my infographic and explanation, you can learn more about this skill.
This insight will help readers invest with more conceptual clarity in the future.
Ways of investing money – decision flow
Before learning more about investment opportunities, we need to know something about the nature of assets. Within a form of investment, there can be several investment alternatives. Depending on the type of assets and the investment alternative chosen, one can choose a convenient way to invest in these assets.
Let me explain the theory to make it clearer. As investors, we need to have this insight.
The above infographic breaks down the entire investment selection process into three steps (arranged in the decision flow matrix):
- Type of assets : First, the investor must choose an asset class. For non-professional investors like us, there are four types of asset classes available for investment. Stocks, debt, gold and real estate. How do you choose between asset classes? We will discuss this in the following points.
- Investment Opportunities : There are several investment options within the same investment. Some common alternatives include stocks, mutual funds, physical gold, real estate, etc. See the infographic above for more information.
- Investment Opportunities : Once we have chosen the asset type and investment option, we need to find ways to invest money in that option. There are two ways to invest money: online and offline. We will learn more about it in the following chapters.
As investors, we should not put all our money into one type of asset. Why? Because this form of investment is risky. The money should be spread over different assets to ensure proper diversification.
The choice of a particular type of plant follows a different logic. Most of us use this reasoning to select assets. The potential benefits that a particular type of asset can provide determine the logic. Therefore, most of them only chase capital because it can bring them maximum profit.
But choosing investments based on return alone is a mistake. The right approach is to combine a high return potential with the need for portfolio diversification.
This explains why we need to be able to choose from different types of assets. Our infographic shows the following four types of assets:
- Honesty: From an investment point of view, buying shares means investing in shares of listed companies. There are essentially three types of stocks available for investment. (a) direct stocks, (b) equity funds, and (c) ETFs. This type of asset has the highest return potential. But if you invest poorly, the risk of loss is also high.
- Guilt: These are risk-free, fixed-income investment instruments. People who want to generate an alternative income can opt for this type of investment. These types of assets are risk-free, but their returns are also low. The combination of debt and equities ensures portfolio diversification.
- Gold: On the one hand, demand for gold continues to grow. On the other hand, it is a limited resource. Why is there always a demand for gold? This is due to the fact that central banks in all countries are accumulating gold. Even the IMF and the ECB hold large gold reserves. Smaller investors also like to invest in gold (coins, bars and SGB) and buy it as jewelry. Today gold is an alternative (and a hedge) to world currencies (inflation).
- Real Estate : Like gold, real estate is a hard asset. This hard asset is one of the best monthly income generators. Moreover, it also serves as a hedge against inflation. This is one of the reasons why the real estate investment market is almost comparable in size to the stock market.
Investment options and forms
#1. Equities, ETFs, MUTUAL FUNDS and REITs (online trading, demat and net banking A/C)
The way to invest money in stocks, mutual funds, ETFs and REITs is to open an online trading account. Just open an online trading account and you are ready to go.
In addition to an online trading account, you must also have two sub-accounts. The first is the dematerialized account. In most cases, the opening of an online trading account is accompanied by a dematerialized account. So you don’t have to do a separate exercise to open this account.
The second is a net bank account. Nowadays, almost everyone has a bank account. If you are not already using netbanking, please select customer service. A representative will help you activate net banking on your bank account.
Let’s assume you already use net banking (any bank). In that case, ask the business account manager to link your existing account in the netbanking system to the new business account.
For more information on how to use a brokerage account to buy stocks, mutual funds and more, visit this link.
#2. GOBI BONDS – NS FACTORY GOBID 1B 9
The GOI issues bonds which the public can subscribe to. We can use the NSE GOBID APP. Web and mobile applications can be used to invest in Government of India bonds.
You must first register in the NSE GOBID application. The registration procedure is online. The NAP verification is also done online. This means that opening an account can be done in an instant.
After registering your account, log in and select the listed T-SECs and bonds. Then pay the required amount online. In most cases, the minimum investment amount is Rs. 10,000 for each T-Sec/bond.
The purchased bonds/securities will be credited to the linked securities account in the coming days.
Recommended reading – A comprehensive guide to retirement planning. Know how to plan, invest and use a pension fund.
#3. EINLAGEN – NETBANKGESCHÄFTE
Deposits can be made in two ways. Firstly, it is a bank deposit, which we also know as a fixed deposit, issued by different banks. The second category refers to corporate deposits issued by Indian companies.
Both types of deposits can be purchased through the Net Banking portal. Let’s assume you have a bank account at Axis Bank. In this case, you can register on Axis Bank’s website or mobile app and get a fixed deposit (or periodic deposit) from Axis Bank.
Investing in corporate deposits is a little difficult. Why? Because there is no common application to identify and invest in them. I found a way to do it, though. I’ll share it with you.
Visit this online resource. Here is a list of the different business deposit accounts available for investments. You will see the company name and the security level. Make sure you invest in deposits from companies with a rating of no less than AAA.
You can also read the specific details of the deposits offered by the company. If necessary, you can also call the editor. If you are happy with the scheme, you can download the application form. Is this your first time doing this? I recommend that you visit the nearest branch in person. Complete the application form in the presence of your representative. You can then make an online payment (RTGS/NEFT) through the online bank.
For beginners, this can seem like a daunting task. But over time, adding business deposits to your investment portfolio will pay off.
#4. BANK – PHYSICAL GOLD
People who want to invest in gold have the following options:
- Physical gold – coins, bars and jewellery.
- ETFs and gold funds.
- Sovereign Gold Bonds (SGB)
If you want to invest in physical gold, it is best to buy coins or bars from banks. Gold purchased from banks is accompanied by a certificate of purity and weight. Experts advise against buying jewelry as a form of investment.
ETFs, gold mutual funds and SGBs can be purchased through an online trading account (as described above).
Investing in e-gold is a bit more complicated. I will ask you to look at the investment process in detail in this article.
#4. REAL ESTATE – DEVELOPER OR AGENT
Investing in real estate has its advantages and disadvantages. People who have become real estate professionals can attest to its effectiveness. There is a process to follow when investing in real estate. Compliance with the procedure guarantees the expected benefits.
The real estate sector is not yet as organized as the financial market. So there are currently only two ways to invest in real estate. To find and buy a property, contact the property developer (for new projects) or the estate agent (for resale).
One way to find a good (new) project in India is to use the RERA websites. Then, somehow, we will have to approach the developer to invest in their project.
Imagine a mobile app, like Amazon or Flipkart, that allows us to buy real estate with one click. Of course, there will be problems, especially with the registration of loans for the purchase of homes and real estate.
In order to implement such a service, a complete infrastructure must be set up. This requires the involvement of the government, banks, developers and real estate agents.
Today we have online portals like MagicBricks, 99Acres, Housing and others. These portals are excellent for property searches. But they can’t help people buy them.
It is also possible to buy a property (resale) without having to deal with estate agents. However, this is only possible if you have already found an interested seller. If this is the case, you can call upon a lawyer to guide you through the next steps in the purchase of a property (before final registration).
If you don’t want to worry about buying physical real estate, you can invest in REITs. Check out the following two articles on REITs:
There are several ways to invest money in India. Depending on your investment choice, you can invest online or offline.
In this article, I have tried to address ways to invest in stocks, riskless options, gold and real estate.
In general, having an active online trading account is sufficient to meet most investment requirements. The exceptions are physical gold and real estate investments.
Personally, I would refrain (as a beginner) from investing directly in government bonds through the NSE GOBID APP. Why? Because indirectly, we can invest in them through mutual debt funds.
Why is it necessary to know all the ways to invest money? We must invest in different asset classes to ensure that our investment portfolio is well diversified. This information is used to construct a balanced, low-risk portfolio.
Frequently Asked Questions
What is the best way to invest money for beginners?
The best way to invest money for beginners is to start with a low-risk, low-return investment. This could be a savings account, a certificate of deposit, or a money market account.
How much money should a beginner invest for the first time?
A beginner should invest $100 to $500.
What is the best way to invest money?
The best way to invest money is to invest in a diversified portfolio of mutual funds, stocks, and bonds.
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