Financial Assets for Investment

Before you plan any of your financial investments, you need to know what are the sources you can you can look upon. Various financial assets come into picture before making any investment. Following are some of the financial assets for investment that you can focus on:

Real Estate:
Property Investments in India have normally been a gold mine for most investors. The growth and development of cities across the country have added fuel to the rise in prices across the country. According to a survey conducted by ASSOCHAM, 65% of working individuals prefer real estate as a mode of long term investment.

Property prices in India have increased by 16.5% in the last year according to a study by Makaan.com. The question now for investors is how best to benefit from investments in realty; whether to look at investments directly in property or route the investments to real estate companies that are listed on the stock markets.

Securities:
Here is a list of the main types of investment securities:

• Bond: A bond is a type of loan or debt security for a certain period for which the issuer pays interest at a predetermined rate. Bonds can be issued by credit institutions, government agencies, corporations and public authorities. 
• Equities: Also known as shares, this pertains to the amount of ownership you buy in a company. The general public usually opts for equities. 
• Derivatives: These are financial instruments that drive their value from direct securities, such as equities and bonds.

Commodities: 

whether they are related to food, energy or metals, are an important part of everyday life. Similarly, commodities can be an important way for investors to diversify beyond traditional stocks and bonds, or to profit from a conviction about price movements. 

Years ago, most people did not invest in commodities, because doing so required significant amounts of time, money and expertise. Today there are a number of different routes to the commodity markets, and some make it fairly easy for even the average investor to participate.

Futures Market:

A popular way to invest in commodities is through a futures contract, which is an agreement to buy or sell in the future a specific quantity of a commodity at a specific price.Futures are available on commodities such as crude oil, gold and natural gas, as well as agricultural products such as cattle or corn.

Most of the participants in the futures markets are commercial or institutional users of the commodities they trade. These hedgers may use the commodity markets to take a position that will reduce the risk of financial loss due to a change in price. Other participants, mainly individuals, are speculators who hope to profit from changes in the price of the futures contract. Speculators typically close out their positions before the contract is due and never take actual delivery of the commodity (grain, oil, etc.) itself.

Source: http://www.copyscape.com/prosearch.php

Understanding Investment!

Investing is thought to be a job for a highly qualified, trained and veteran professional who has seen the ups and downs of markets, and has come out of the downs in green. Complex valuations, insider news, contacts with large investors, high value trading, etc. are some thought-to-be pre-requisites for one to make money in the markets.

If you are the one who has links to the latest buzz in the market before anyone else, then you are gifted with profitability and success. But for a moment let's try to think of just one question - Is it really tough to earn some decent money in share market?  But the question is not very difficult to answer.

What most retail investors want to do is make a fortune within a short span in the markets. If that was possible then everyone would have been an investor. What we need to understand is that markets can be very rewarding for some and sometimes. For a common investor they can definitely provide a return which is worth putting money in the market.

Equities work in the most mysterious ways and are much more difficult to digest in hindsight. The first part indicates the fact that we often may not see a stock being robust, in terms of numbers, when the markets are making new yearly highs.

Derivatives, futures and options are another way to make money. People do trading in derivatives for hedging and speculation. If you think that derivatives are something that tosses your mind every time you tdery to understand them, then stay away from them.

No point putting your money in a game when you can't even play it. In case you are fine with what these instruments are, how to trade, how much investment is required and what the risks are, then you can use them as an effective tool for portfolio management. As an investor, you should always gauge your maximum downside. Derivatives become worrisome when we see markets going one way - up or down.

Usually retail investors buy/sell Nifty or Sensex lots and sell/buy them after a descent gain. But what if the markets are going up/down and not providing an opportunity to reverse your position. Being in the market, one should not be hesitant to accept losses but the maximum loss can be limited with some due consideration.

For professional investors, fundamentals and market variables have an important bearing as they have to justify their positions to their investment committees or boards.

To earn a decent return might not be a very difficult task if we can do a bit of common sense investing.

Source :Rediff Business

Word of the Day: Derivative

Explanation: A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset.

The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes.