Investments involve allocating resources to an asset or group of assets with the expectation of generating future income or value appreciation. Common investment avenues include stocks, mutual funds, land, and business enterprises. Many people participate in the stock market through mutual funds or direct stock trading.
Mutual Funds:
Mutual funds pool resources by issuing units to investors and invest in a diversified portfolio of securities based on the objectives outlined in their offer documents.
Diversification reduces risk as different stocks may not move in the same direction or magnitude at the same time.
Investors in mutual funds are referred to as unit holders, and mutual funds must register with the Securities and Exchange Board of India (SEBI) before collecting funds from the public.
Growth/Equity Funds: These funds aim for capital appreciation over the medium to long term by investing primarily in equities. They involve higher risks compared to other schemes.
Income/Debt-Oriented Schemes: These funds aim to provide regular income to investors by investing in fixed-income securities like bonds, debentures, government securities, and money market instruments. They are generally less risky than equity funds.
Trading Stocks:
Over 5,000 companies' stocks are available for investment on India’s major stock exchanges: the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Stocks can be purchased through brokers registered with SEBI, ensuring a regulated trading environment.
Shares/Stocks:
Shares represent ownership in a company, granting investors rights such as voting and attending annual general meetings.
Returns on shares depend on the company’s profitability and can fluctuate with its business performance.
While investing in stocks offers benefits, it is crucial for investors to understand the company’s business and have a long-term investment horizon.
*The information in this document has been adapted from articles available on https://www.rbi.org.in/FinancialEducation/Home.aspx The original articles can be accessed directly for more comprehensive insights.
Comments