What are different types of investment?

Types of investment

There are many types of investment available most popular way of investment are as below

1.     Financial Assets (that cannot be traded)

2.     Bonds 

3.     Stocks 

4.     Money Market Instruments 

5.     Mutual Funds

6.     Insurance

7.     Financial Derivatives

8.     Real Estate

Let's look at each one of them 

1.     Financial Assets (that cannot be traded)

A number of financial assets can not be traded with a third party. Such schemes are listed below. 

1.     Bank Deposits: It’s simple and everyone knows about it. 

2.     Post Office Savings 

3.     Provident Funds 

4.     Chit Funds 

5.     Company Deposits 

2.  Bonds 

Bonds are debt securities or long-term debt instruments. An authorized issuer of bonds promises the person who holds the bond to pay interest on particular periods and to return the principal after a fixed period (at the time of maturity of the bond).

1.     Government Agency Securities 

2.     PSU Bonds 

3.     Private Debt Securities 

4.     Preference Shares 

5.     Mortgage Based - Securities 

Tax compliance – Most of the above investment attract tax on the profit at the time of realization. 

3.  Stocks

Stocks represent ownership. A person who holds stocks of a particular company is treated as one of the many owners of the company and deserves a share of the net profit that company earns after all expenses. Stocks is one of the best investment options available and at the same time it demands knowledge about many fundamentals to make a decent return. 

Different types of stocks (as classified by financial analysts) 

·        Large cap stocks

·        Midcap stocks

·        Small cap stocks

·        Penny stocks

Tax compliance – The best part of investing in stock is – it doesn’t attract any tax if you sell them after 1 year of purchase. If sold within a year of purchase then it attracts flat 15% tax on profit value.

4. Money Market Instruments 

These are debt instruments with less than 1 year duration for maturity.

Different types are 

·        Treasury Bill 

·        Commercial Paper 

·        Certificate of Deposits 

Tax compliance – Most of the above investment attract tax on the profit at the time of realization.

5.  Mutual Funds

Mutual Funds are a better investment option for those who can’t find time to learn about stock market and its trends or those who don’t understand it’s working correctly. Mutual funds are usually managed by a Private financial company or a Bank. 

Different types of mutual funds are:-

·        Stock-based schemes 

·        Fixed income schemes 

·        Monthly income schemes 

·        Tax saving schemes 

·        Hybrid schemes 

·        Balance schemes 

·        Sector schemes 

·        Floating rate schemes 

Tax compliance – Tax on equity oriented mutual funds are taxed similar to stocks which is - it doesn’t attract any tax if you sell them after 1 year of purchase. If sold within a year of purchase then it attracts flat 15% tax on profit value.

6.  Insurance

Insurance is also a form of investment but I don't prefer them. As a piece of advice don't mix investment and Insurance.

Different types of insurance investments are; 

·        Endowment assurance policy 

·        Money back policy 

·        Whole Life policy 

·        Term assurance policy 

·        Unit Linked Policy – ULIP

Tax compliance – Most of the above investment attract tax on the profit at the time of realization.

7.  Real Estate

Real estate is a popular way of investment where an investor buys a property in less price and sells the property after a price rise.

Tax compliance – Investing in real estate attracts hefty tax of 30% of the profit amount unless reinvested in real estate.