There are many financial instruments to choose from. But all of them might not fit in your portfolio depending upon your capital, risk appetite, liquidity and time frame. You may need to diversify your investments for variety of purposes and for avoiding the risk of concentrating too much on a single or particular asset. So here is a list of Top Investment Options you can choose from according to your needs and wants -
1) Savings Account
A savings account is an interest-bearing deposit account held at a bank or other financial institution. Though these accounts typically pay a modest interest rate, their safety and reliability make them a great option for parking cash you want available for short-term needs.Note that this is not an Investment Option through which you are going to grow rich but is a popular way and is used by mostly all of the people the world over, to park their cash as it is virtually risk-free financial instrument where you can park your cash.
2) Bonds
Bonds are the most common lending investment traded on securities markets. When issued, a bond includes a specified maturity date — the date when your principal is repaid. Also specified when a bond is issued is the interest rate, which is typically fixed.
Bonds, therefore, can fluctuate in value with changes in interest rates. If, for example, you’re holding a bond issued at 5 percent and the market level of interest rates increase to 7 percent for newly issued similar bonds, your bond will decrease in value. Why would anyone want to buy your bond at the price you paid if it yields just 5 percent, and he/she can get a similar bond yielding 7 percent somewhere else?
Bonds differ from each other in the following ways:
The type of institution to which you’re lending your money
Institutions include state and local governments, the federal government, mortgage holders, and corporations. Foreign governments or corporations can also issue bonds. The taxability of the interest paid by a bond is tied to the type of entity issuing the bond. Corporate, mortgage, and foreign government bond interest is fully taxable. Interest on government bonds issued by U.S. entities is usually free of state and/or federal income tax.
The credit quality of the borrower to whom you lend your money.
The probability that a borrower will pay you the interest and return your entire principal on schedule varies from institution to institution. Bonds issued by less-creditworthy institutions tend to pay higher yields to compensate investors for the greater risk that the loan will not be fully repaid.
3) Stocks
Stocks are the most common ownership investment traded on securities markets. They represent shares of ownership in a company. Companies that sell stock to the general public (called publicly held companies) can include all types of legal businesses!
When you hold stock in a company, you share in the company’s profits in the form of annual dividends (although some companies don’t pay dividends) as well as in an increase (you hope) in the stock price if the company grows and makes increasing profits. That’s what happens when all is going well. The downside is that if the company’s business declines, your stock can plummet or even go to Rs 0 per share.
4) Real Estate
Real Estate is the most practical and physical of ownership investments. It has made many people wealthy. Not only does real estate produce consistently good rates of return over long investment periods, but you can also purchase it with borrowed money. This leverage helps enhance your rate of return when real estate prices are rising.
As with other ownership investments, the value of real estate depends on the health and performance of the economy, as well as on the specifics of the property that you own:
1) If the local economy grows and more jobs are being produced at higher wages, real estate should do well.
2) If in the community housing is sitting vacant because of previous overbuilding, rents and property values are likely to fall.
5) Gold, Silver and Other Precious Metals
Whenever bad things happen, especially inflation, credit crises, and international conflicts, investors seek out gold, silver, and other precious metals. As a result, demand for these precious metals becomes more whereas nobody is ready to sell. This increases the prices of precious metals. They have made many people super rich in the past and still are considered an essential part of the portfolio. They are mainly used as an asset of diversification during economic crisis when other assets are plummeting.
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