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Mutual Funds
Mutual funds let people put money into a mix of stocks and bonds without choosing each company. The fund manager chooses a mix of securities to include based on a stated goal and risk tolerance.
Each person who invests owns a portion of the total mutual fund.Many people pool money into one fund to get the power of scale. The major benefit is professional management that picks and balances assets well. This aims to deliver higher returns than non-experts could achieve alone.
There are equity funds focused on fast growth potential, debt funds for steady income, and hybrid funds balancing both. By owning mutual fund shares, everyday people can grow wealth through market opportunities that previously needed large capital.
Over longer periods, mutual funds tend to perform better than fixed bank deposits. Yet they do carry more risk in any given year. Overall, mutual funds allow easy, well-spread investing for retirement money, children’s college funds, or making wealth. The simplicity helps people smoothly reach aims like these.
Stocks
Stocks allow owning part of a company by purchasing shares. The more shares owned, the greater the proportional claim to that company’s future earnings and assets.
Public companies list shares on stock exchanges where prices change throughout market hours based on supply/demand. Investors buy stocks they think will rise in price and sell to book profits. Profits come from share price appreciation and from dividends – regular payouts some companies give shareholders.
Stocks carry higher risk but historically deliver good long term returns, outpacing bonds, gold etc. They are liquid assets that can be converted to cash anytime the exchange is open. Stocks form a key avenue of investing for retirement, children’s education needs and other goals.
Choosing the right stocks involves assessing aspects like financial health, leadership quality, industry growth forecasts, competition level, dividend history etc. of companies. Investing across diverse stocks reduces overall portfolio risk. In the long run, stocks aid building significant wealth.
Commodities
Commodities are basic goods that are bought and sold in large quantities. They fall into two types – hard and soft commodities. Hard commodities come from mining or drilling such as metals (gold, silver) or energy (oil, gas). Soft commodities arise from agriculture like crops (wheat, soybeans), coffee and meat. Prices depend on demand and supply dynamics. Commodities trade in dedicated exchanges where standard contracts are issued. Buyers don’t take physical delivery but contract owners can claim quantities later. Traders speculate on price changes to profit. For individual investors, commodities help diversify beyond just stocks and bonds. Their unique price drivers also hedge overall risk in one’s portfolio. Gold for example retains value during market slides. While retail investing in commodities gained popularity earlier, nowadays indexes and mutual funds provide easier access to small buyers. They offer exposure to commodity assets without operating specialized accounts. Overall commodities remain an asset class enhancing portfolio returns over long periods.
Fixed Deposit
A fixed deposit (FD) is a secure way to invest money in a bank for a set timeframe and guaranteed return. You deposit a lumpsum that cannot be withdrawn during an FD’s term, usually from 3 months to 10 years. In exchange, the bank pays a pre-fixed interest rate.
FDs offer higher interest earnings than regular savings accounts. You know exactly what total sum will come back after the lock-in tenure. The rate varies based on the FD duration – longer terms get higher interest. Senior citizens also receive ~0.5% extra interest from banks. Tax deductions apply on the interest earned if held for 5+ years.
FDs suit investors unwilling or unable to risk money in equity but wanting slightly better income than savings accounts provide. The assured returns help plan financial goals like buying a car, home renovation, children’s education expenses etc. over the long term. FDs combined with stocks balance a portfolio well between safety and high growth.
The fixed income helps manage cashflow needs reliably by laddering maturity timeframes. One can withdraw funds penalty-free in medical or other emergencies too by breaking longer FDs prematurely if required.
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