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    Investment Strategies

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    myschool90
    Investment is deferred consumption aimed at generating future returns. There are many investment options with varying risk-reward profiles. The investment industry includes cash investments like savings accounts, debt securities like bonds, equity investments like stocks, mutual funds, derivatives, commodities, and real estate. India's investment industry has grown significantly and sectors like banking, IT, and consumer goods are promising areas for investment, though infrastructure and fiscal deficits pose challenges. A balanced, long-term approach can help investors achieve high returns while managing risks.

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    Investment Strategies

    Uploaded by

    myschool90
    38 views2 pages
    Investment is deferred consumption aimed at generating future returns. There are many investment options with varying risk-reward profiles. The investment industry includes cash investments like savings accounts, debt securities like bonds, equity investments like stocks, mutual funds, derivatives, commodities, and real estate. India's investment industry has grown significantly and sectors like banking, IT, and consumer goods are promising areas for investment, though infrastructure and fiscal deficits pose challenges. A balanced, long-term approach can help investors achieve high returns while managing risks.

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    Investment is deferred consumption aimed at generating future returns. There are many investment options with varying risk-reward profiles. The investment industry includes cash investments like savings accounts, debt securities like bonds, equity investments like stocks, mutual funds, derivatives, commodities, and real estate. India's investment industry has grown significantly and sectors like banking, IT, and consumer goods are promising areas for investment, though infrastructure and fiscal deficits pose challenges. A balanced, long-term approach can help investors achieve high returns while managing risks.

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    38 views2 pages

    Investment Strategies

    Uploaded by

    myschool90
    Investment is deferred consumption aimed at generating future returns. There are many investment options with varying risk-reward profiles. The investment industry includes cash investments like savings accounts, debt securities like bonds, equity investments like stocks, mutual funds, derivatives, commodities, and real estate. India's investment industry has grown significantly and sectors like banking, IT, and consumer goods are promising areas for investment, though infrastructure and fiscal deficits pose challenges. A balanced, long-term approach can help investors achieve high returns while managing risks.

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    What is Investment?

    Investment is referred to as the concept of deferred consumption, which might comprise of purchasing
    an asset, rendering a loan, keeping the saved funds in a bank account such that it might generate
    lucrative returns in the future. The options of investments are huge; all of them having different risk-
    reward trade off. This concludes that the investment industry is really broad and that is why
    understanding the core concepts of investments and accordingly analyzing them is essential. After
    thorough understanding of the investment industry, can an investor create and manage his own
    investment portfolio such that the returns are maximized with the least risk exposure.

    Types of Investments in the investment industry

    As stated earlier, the investment industry is huge; therefore the types of investments are also varied.
    Different types of investments are: Cash investments: Cash investments comprise of savings bank
    accounts, certificates of deposit (CDs) and treasury bills (TBs). All these types of investments render
    a low interest rate and prove to be quite risky during times of inflation.

    Debt securities: This type of investment gives returns in the form of fixed periodic payments and the
    fixed capital appreciate at maturity. This is safe bait for the investors in the investment industry and
    has always proved to be the risk free investment tool. Though, it is generally low in risks, the returns
    are also lower than the other peer securities.

    Stocks: Investors can also buy stocks (equities) from the secondary markets and be a part of any
    business corporates that are listed in the bourses. By this way, one can become the part of the profits
    that the company generates. But one should remember that stocks are generally more volatile and
    carries more risk than bonds.

    Mutual funds: They are usually a collection of stocks and bonds that a fund manager selects for an
    investor such that the returns are maximum. The investor does not have to track the investment, be it
    a bond, stock- or index-based mutual funds.

    Derivatives: Derivatives are financial contracts, whose value is derived from the value of the
    underlying assets like equities, commodities and bonds. They can take the form of futures, options
    and swaps. Investors choose derivatives as they are used to minimize the risk of loss that result from
    variations in the underlying asset values.

    Commodities: The items that are traded on the commodities market are agricultural and industrial
    commodities and they need to be standardized. Commodities trading have always been giving high
    returns and thus they are the riskiest of all investment options. One, who trades in commodities,
    requires specialized knowledge and analytical capabilities.

    Real estate: Investing in real estate has to be a long term affair. Funds get hooked into the real estate
    sector for a considerable time period.
    The investment industry in India - how is it going? India's equity market has doubled since March
    2009, with ADRs like Dr. Reddy's Laboratories and Tata Motors only getting doubled and tripled. So,
    do we say that the Indian investment industry is overheated at the moment or may we infer that the
    stocks are fairly valued?

    Warren Buffett has always mentioned that investment in India should always be a long-term story - as
    the industry has been growing from an emerging market to a developed one. The next 10 years in
    India will surely give good returns.

    India's GDP growth would be around 6.5% to 7% in 2010. The sustainable growth rate of India would
    however hover around 7%. Before becoming a mature economy, India has another 20 to 40 years to
    spare.

    Where to invest in India?

    The financial sector in India, specifically the banking stocks have been doing well now. The health of
    the Indian banks seems to be strong and a lot of growth is expected in the organic frontier. The IT
    stocks too have been faring well and that is why it is advisable that the investors invest in stocks of
    quality companies that have a good earnings track record. The other choice of stocks has been the
    consumer goods stocks, auto stocks, agriculture-related stocks. Some of the favorite scrips that
    investors can look forward to are Infosys Technologies, HDFC Bank, ICICI Bank.

    Challenges of Indian Investment industry

    The investing story in India has not been always that smooth. Pitfalls are sure to co-exist. The main
    restraint on India's growth now happens to be its infrastructure. On the other hand, infrastructure is
    India's biggest opportunity as well. The fiscal deficit of India also poses a big threat to the investment
    industry in India. For an emerging economy like India, it is recommended that an investor always
    balances the unique risks against the potential for high long-term growth. Accordingly the decision for
    investment should be made.

    Of late, the Indian economy is turning out to be extremely conducive in terms of domestic and foreign
    investments. India Investments has been the major propelling force towards India's attainment of self-
    sustained growth by way of rapid industrialization. The pioneers of the investment industry has been
    Foreign Direct Investment (FDI) and Investments made by NRIs.

    Foreign Direct Investments in India has been gearing up momentum every passing day. So, to view
    an economy which is entirely open to the global markets, the investment industry in India should be
    groomed in a manner that the maximum returns are achieved. It is advisable that the investment
    industry's potential should neither be overestimated nor underestimated. We should know how to deal
    with the complexities of the investment industry and grow along with it.

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