Is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. There are 5 asset classes which investors can put there money in on The NSE. They are:
Equities (Stocks): Owning a piece of a company • No promises about returns of the initial investment i.e. risker than bonds/debentures • The profitability of the investment depends on the performance and growth (increasing profits) of the company. – Dividend and Capital gains • Investors who are willing to take on greater risks has propensity to gain higher in the long run • Investors have a vested interest in the business’ success, i.e. its growth, profitability and increase in value
Benefits of Equities Investment
• Capital Appreciation: The potential for capital appreciation is one of the primary advantages of equity investments • Dividends: If you are looking for a steady stream of regular income, you might consider investing in the stocks of blue chip companies
• Liquidity: Stocks are traded on major exchanges around the globe and around the clock, making them a liquid investment, which means you have a ready market to sell your stocks when you want
• Diversified Portfolio: Because you can buy small number of shares you can get greater diversification through investing in shares and you are more insulated from any possible downturns.
Consider an investor who bought 100 shares each of the Companies below at the beginning of 2010. The table shows his holdings and total returns (Dividend + Bonus + Capital Appreciation) over a 5-Year period ending December 31, 2014.
Fixed Income Securities:
Lending money to a Company or Government /Government Parastatal for interest within a given period • Return is known and steady flow of income (interest) • Easy to plan cashflows • Interest received on Government bonds are tax exempt • The guarantee of payback and all coupon payments relies solely on the ability of the borrower to generate enough cash flow to repay bondholders.
Real Estate through REITs:
A real estate investment trust (REIT) is a trust that owns and manages income-producing real estate. Is considered as an alternative asset and owning part of a or set of property(ies). • Steady dividend income; REITs pay at least 90% of taxable income as dividend to unitholders. • The dividend is tax exempt ??? • Easy to plan cash flow . • Enhances portfolio diversification • There is also room for capital appreciation
Exchange-Traded Fund (ETF):
is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. • Diversification • Lower Fees Compared to Managed Funds • ETFs trade on an exchange all throughout the trading day, just like a stock • Capital gains taxes are generally lower for ETFs than traditional mutual funds due to the structure of each trade. • No Investment Minimums – can be purchased for as little as one share.
Is a pool that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. • Advanced Portfolio Management • Dividend Reinvestment • A reduced portfolio risk is achieved through the use of diversification • Convenience and Fair Pricing • Mutual funds are well regulated to avoid mismanagement.