India, one of the fastest growing economies in the world is attracting a lot of foreign investors today. Today, Indian economy is growing with a good pace and with it is linked the Investment opportunities growth. Most of the investors have an eye on the markets that have a higher growth rate than the developed economies. India today is one of the top choices for investment for various investors. But the question is where to invest in India?
INVESTMENT AVENUES
Investment in India can be classified into 2 classes:
- Risky assets class
Risky assets refer to assets that have a significant degree of price volatility. This class contains investment options that offer unguaranteed return. Risky Assets carry a varying level of risks with them. Some of the risky assets are commodities, equities, high-yield bonds, real estate and currencies. In the banking context, risk assets generally referred as an asset owned by a bank or financial institute whose value may fluctuate due to changes in interest rates, credit quality and repayment risk and so on. The term may also refer to equity capital in a financially stretched or near-bankrupt company, as its shareholders’ claims would rank below those of the firm’s bondholders’ and other lenders.
2. Risk free assets class
Risky assets class contains assets that have certain future return for sure. Different people say it differently, some says that there’s no asset that can be called as risk free because all financial assets carry along with them some sort of risk. It’s a different point of view if the risk associated with an asset was very small and can be neglected by the owner, but it still exists. Government bonds are generally not considered risky assets. Let’s start off with the Risky assets in this article with the Risk free assets covered in the next article.
RISKY ASSETS
1. MUTUAL FUNDS:
Mutual fund, an option to get your money managed professionally. The investment avenues offers
- Cost efficiency
- Professional management
- Risk – diversion
- Good regularity body
It allows investors to start with a minimum of just Rs. 500. NRI can easily invest into mutual funds. What it requires is just a bank account in India & KYC (Know Your Client) to invest in Indian mutual funds.
2. DIRECT EQUITIES
A type of security which offers the investors the ownership of a company. Equities are bought & sold in the Stock Exchanges. It is one of the good investment options for a long term horizons. It beats all the asset class in terms of returns over a longer time frame. With good return comes in greater risk and hence can be considered as one of the riskiest asset class as well. Equities are highly risky. The risk of loss of capital is very high. NRI can also explore this avenue for Investment by opening up a bank account and trading account in India. They can choose the option of repatriation of non- repatriation at the time of opening an account.
3. COMMODITIES
Having emerged as one of risky assets class in recent time commodity trading is still in its nascent stage in India. The Government has allowed investment into listed commodities. Currently, commodity trading is available in bullions, base metals and Agri-commodities. Investor needs to open an account with the broker to trade in a commodity market. Commodity market is very risky. Only investors with sound knowledge are suggested to invest in commodities. As of now, NRIs are not allowed to trade in commodity market in India.
4. LIFE INSURANCE
Life Insurance is a legal contract between a buyer and the insurance company. Insurance company is liable to pay a predominant amount to the nominee in case of death of a buyer. The primary focus of life insurance is to protect the family (financially) in case of an event of death of the earning member of the family. Until the introduction of Unit Linked Insurance Plan (ULIP), Life insurance was a traditional product and it was giving fix returns of 6%- 7%. ULIP gives the benefit of risk cover as well as the returns of equity market as it invest the premium into equity linked instruments. Now, Insurance is also open for NRI investment. To buy insurance in India, NRI has to go through few formalities. NRI needs to submit Proposal from (available in prescribed format), Medical Report, and Proof of age and Income etc.
5. REAL ESTATE
The most profitable and an evergreen investment option toady in India is Real Estate. Whether a residential or commercial property most of the investor today prefers investment into real-estate. Look at the property available at 15-20 Km away from the city with the time frame of 5- 7 Yrs if you want to invest in Real Estate and that’s the Guru Mantra today. Real estate investment offers very low level of liquidity and generate higher rate of returns. NRI’s are fee to invest into Indian real estate. They can buy and own property in India, however, few Real estate Investment Trust are not open for NRI investment.
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