INVESTMENTS ALTERNATIVES

INVESTMENTS ALTERNATIVES

It include private equity or risk capital , hedge funds, managed futures, art & antiques, commodities, and derivatives contracts.

INVESTMENT ALTERNATIVE

An alternative investment may be a financial asset that doesn't fall under one among the traditional investment categories. Conventional categories include stocks, bonds, and cash. The majority of the investment alternative resources are held by institutional speculators or certify, high-total assets people because of their mind boggling nature, absence of guideline, and level of hazard.

Alternative investments include private equity or risk capital , hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. Real estate is additionally often classified as an alternate investment. There are various types of investment alternatives which are discussed as follows.

TYPES OF INVESTMENT ALTERNATIVE:

Non-negotiable Securities:

Non-negotiable refers to the worth of an honest or security that's firmly established and can't be adjusted, or a neighborhood of a contract or deal that's considered a requirement by one or both involved parties. Additionally, the term can relate to an honest or security whose ownership isn't easily transferable from one party to a different.

Fixed income securities:

Fixed income securities are a kind of certificate of indebtedness that gives returns within the sort of regular, or fixed, interest payments and repayments of the principal when the safety reaches maturity. The instruments are issued by governments, corporations, and other entities to finance their operations. They vary from value, as they are not doing involve a possession enthusiasm during an organization, however they give a status of guarantee, when contrasted with value premiums, in instances of liquidation or default.

It includes:

  • Preference shares;
  • Debentures;
  • Bonds;
  • Indira Vikas Patra’s (IVPs) and Kisan Vikas Patra’s (KVPs);
  • Government securities.
     
Variable-income security:

The term variable-income security refers to investments that provide their owners with a rate of return that is dynamic and determined by market forces. Variable-income securities provide investors with both greater risks also as rewards.

Real asset:

Financial asset that doesn't fall under one among the traditional investment categories. Conventional categories include stocks, bonds, and cash. The majority of the investment alternative resources are held by institutional financial specialists or authorize, high-total assets people because of their perplexing nature, absence of guideline, and level of hazard.

Non-marketable Financial Assets:

A good portion of monetary assets is represented by non-marketable financial assets. A distinguishing feature these can be classified into the following broad categories:

  • Post office deposits;
  • Company deposits/ Corporate Deposits;
  • Provident fund deposits;
  • Bank deposits.
     
Equity Shares:

Equities are a kind of security that represents the ownership during a company. Equities are traded (bought and sold) available markets. Alternatively, they will be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company Equity shares are classified into the following broad categories by stock market analysts:

  • Blue chip shares-Stocks that have national reputation to operate profitability in both good and bad times
  • Growth shares-Stocks have higher growth rate than industrial growth rate in profitability
  • Income shares– Stocks having stable operations and limited growth opportunities
  • Cyclical shares-The upward and downward movement of shares affects the stock prices
  • Speculative shares-Shares having lot of speculative trading
  • Defensive shares-Stocks not affected by market movements
     
Bonds:

The debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing is called as bonds. It is certificates acknowledging the cash lend by a bondholder to the corporate. It states it maturity, rate of interest, and face value.

Bonds may be classified into the following categories:
  • Government securities;
  • Government of India relief bonds;
  • Government agency securities;
  • PSU bonds;
  • Debentures of private sector companies;
  • Sovereign Gold Bonds;
  • Preference shares
     
Money Market Instruments:

Debt instruments which have a maturity of but one year at the time of issue are called market instruments. The important money market instruments are:

  • Treasury bills;
  • Commercial paper;
  • Certificates of deposits.
     
Mutual Funds:

A open-end fund is formed from money that's pooled together by an outsized number of investors who give their money to a fund manager to take a position during a large portfolio of stocks and / or bonds. The speculations by the Mutual Funds are made in values, securities, debentures, call cash and so forth., contingent upon the conditions of each plan skimmed by the Fund.

  • Equity schemes;
  • Debt schemes;
  • Balanced schemes;
  • Hybrid Investment Schemes.

Common assets (here and there called alt assets or fluid alts) are freely offered, SEC-enrolled shared supports that hold non-customary speculations or utilize complex venture and exchanging methodologies. Speculators considering alt assets ought to recall of their one of a kind attributes and dangers.

Life Insurance:

Life insurance may be a contract between the policy holder and therefore the insurer, where the insurer promises to pay a delegated beneficiary a sum of cash (the "benefits") upon the death of the insured person. The important types of insurance policies in India are:

  • Endowment assurance policy;
  • Money back policy;
  • Whole life policy;
  • Term assurance policy;
  • Unit Linked Insurance Plans (ULIPs).
     
Real Estate:

For the majority of the investors the foremost important asset in their portfolio may be a residential house. In addition to a residential house, the more affluent investors are likely to have an interest within the following sorts of real estate:

  • Agricultural land;
  • Semi-urban land;
  • Urban Land for residential purposes;
  • Urban Land for commercial purposes;
  • Time share in a holiday resort.
     
Precious Objects:

Valuable objects are things that are commonly little in size yet profoundly important in fiscal terms. Some significant valuable objects are:

Gold and silver Precious stones Art objects.

Financial Derivative:

A financial derivative is an instrument whose value springs from the worth of an underlying asset. It may be viewed as a side back the asset. The most important financial derivatives from the purpose of view of investors are:

  • Options
  • Futures
Non-financial Instruments
Real estate

With the ever-increasing cost of land, real estate has come up as a profitable investment proposition. 

Gold

The 'yellow metal' may be a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, variety of products which derive their value from the worth of gold are available for investment. These mainly include gold futures and gold exchange traded funds.
 

EDITED BY DHIVYA

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