NETWORTH .... YOUR ASSET CLASSES
Equity:
Equity as an asset class refers to buying shares of companies typically listed on the stock exchanges. Equity has been amongst the best performing asset in the long term and brings in the growth element in your portfolio. However, equity is also volatile and does not grow linearly. You could invest in equity directly by buying into shares or stocks or through mutual funds. Equity should be looked at as a long term investment.
Debt:
Debt refers to investments that earn fixed interest or coupon by lending to corporates or government. Value of debt securities could also appreciate or depreciate with changes in the interest rates, though they are not as volatile and bring in stability and income to a portfolio. Debt investments are relatively safe but may just about earn to beat inflation. You could buy debt products by directly investing into NCDs, bonds, deposits or through mutual funds. Debt investments can be looked at for varying periods based on the investment tenure.
Gold:
Gold is one of the most common investment amongst Indians. This could be held in form of jewellery, gold bars and Gold ETF. Gold has seen to provide a hedge to other financial assets specifically during economic crises. Gold also provides a hedge to domestic currency devaluation. However, the value of gold is largely a function of demand and supply and it doesn't generate any income, dividend or interest, unlike other financial assets.
Realty:
Realty refers to investments into real estate like house, land or offices. Realty can give both income and growth to a portfolio. Since they can be leveraged (bought with a loan), that can give a multiplier effect to the returns. However, realty is largely illiquid (you cannot immediately sell) and since they can form a large portion of a portfolio can pose a specific risk to the portfolio.
Alternative:
Alternative investments are all other investments that do not directly form a part of the commonly held assets. These could be investments into Private Equity, Hedge Funds, Art or even wines. These funds vary in terms of the risk, are largely illiquid and may not follow a distinct behaviour.
Cash and Liquid :
Cash and liquid are investments with very short duration typically in the money markets with tenure of less than 91 days. As the name suggests these investments can be encashed at any time without exit loads. Given that these are investments into short term instruments, the returns are least volatile (as compared to other asset classes) and are typically lower than other debt investments which are for longer term. These are the best investments if you are looking to invest for 1-12 months without taking too much risk. These can be through money in your bank account and liquid mutual funds.
Equity:
Equity as an asset class refers to buying shares of companies typically listed on the stock exchanges. Equity has been amongst the best performing asset in the long term and brings in the growth element in your portfolio. However, equity is also volatile and does not grow linearly. You could invest in equity directly by buying into shares or stocks or through mutual funds. Equity should be looked at as a long term investment.
Debt:
Debt refers to investments that earn fixed interest or coupon by lending to corporates or government. Value of debt securities could also appreciate or depreciate with changes in the interest rates, though they are not as volatile and bring in stability and income to a portfolio. Debt investments are relatively safe but may just about earn to beat inflation. You could buy debt products by directly investing into NCDs, bonds, deposits or through mutual funds. Debt investments can be looked at for varying periods based on the investment tenure.
Gold:
Gold is one of the most common investment amongst Indians. This could be held in form of jewellery, gold bars and Gold ETF. Gold has seen to provide a hedge to other financial assets specifically during economic crises. Gold also provides a hedge to domestic currency devaluation. However, the value of gold is largely a function of demand and supply and it doesn't generate any income, dividend or interest, unlike other financial assets.
Realty:
Realty refers to investments into real estate like house, land or offices. Realty can give both income and growth to a portfolio. Since they can be leveraged (bought with a loan), that can give a multiplier effect to the returns. However, realty is largely illiquid (you cannot immediately sell) and since they can form a large portion of a portfolio can pose a specific risk to the portfolio.
Alternative:
Alternative investments are all other investments that do not directly form a part of the commonly held assets. These could be investments into Private Equity, Hedge Funds, Art or even wines. These funds vary in terms of the risk, are largely illiquid and may not follow a distinct behaviour.
Cash and Liquid :
Cash and liquid are investments with very short duration typically in the money markets with tenure of less than 91 days. As the name suggests these investments can be encashed at any time without exit loads. Given that these are investments into short term instruments, the returns are least volatile (as compared to other asset classes) and are typically lower than other debt investments which are for longer term. These are the best investments if you are looking to invest for 1-12 months without taking too much risk. These can be through money in your bank account and liquid mutual funds.
Happy Investing
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