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List of Different Asset Classes for Investing

by Manish Chauhan · 77 comments

Below is the list of different Asset classes one can consider for investing in Indian markets. For building a successful balanced portfolio one has to understand different asset classes and as per their risk appetite, one has to build his/her portfolio so that it’s optimal from his risk return point of view. In this post you will look at different asset classes and their sub categories with the risk potential. This is not an exhaustive list of categories, however it covers most of them. See the Chart Below

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Readers who are reading it in Email can see the chart here or visit blog article

Points to Remember

  • The above chart does not contain exhaustive list of products and asset classes. See What is Asset Allocation
  • REIT and REMF are yet to come to India, they are not there in market yet
  • Mutual funds classification is not complete. There are different ways to classify mutual funds, the one I have shown is one of the way. Here is the list if good Equity Funds and Debt oriented Mutual funds

Comments! I am sure I missed out somethings in this chart, please suggest me something I can add.



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{ 77 comments… read them below or add one }

1 Krishna Kumar January 14, 2010 at 10:36 pm

Excellent diagrom. Can you add the following products in the diagrom

1) EPF
2) Balanced Funds
3) NPS

Reply

2 manish January 14, 2010 at 11:39 pm

Krishna

Thanks for the comment :) . I have added EPF and NPS . Balanced Funds was already there .

What are your views on Silver as investment ? Do you invest in Mutual funds ?

Manish

Reply

3 aditya modi January 15, 2010 at 2:15 pm

manish good piece of info

regarding silver

if you discount the current movement in prices

THe fact remains

Gold-70% production is meant for ornaments so the demand is till eternity
Silver-14% production meant for ornaments max rest is for industrial use so the demand supply correlation is complex here.

I would recommend Gold for one simple reason-its PPP. Over the last 150 years if you track it, its purchasing power is surprisingly constant. Only thing in indian context is the question of selling it, which we consider more of a distress selling rather than a profit booking or investing decision

Thanks

Aditya

Reply

4 manish January 15, 2010 at 2:20 pm

Aditya

Good point . However still I didnt understand why you conculded that Silver is a better option than Gold ?

Do you have access to GOLD prices in last 150 yrs . Can you please share the study / graphs ?

Manish

Reply

5 Srinivas January 15, 2010 at 2:27 pm

for gold prices…refer http://www.measuringworth.org/gold/
enter the starting year and end year…(right side).
Yes. gold is a good option (I read your http://www.jagoinvestor.com/2008/04/gold-as-investment.html )
Main problem is protecting the physical gold. I too think investing in gold ETFs and redeem and buy physical gold when you need it.

Reply

6 Manish Chauhan January 15, 2010 at 3:24 pm

Srinivas

It looks like a great site .. I will surely see the site and come up with something :)

Manish

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7 Srinivas January 29, 2010 at 12:25 pm

Thank you. But when you say ETF does it implicitly mean Index fund or Gold ETF?. I have been analyzing gold ETF but over a long period of 20 years gold ETFs returns cannot be more than 7%.

Reply

8 manish January 29, 2010 at 3:49 pm

Srinivas

When I say ETF , it means Index ETF , not Index fund !! .

There are ETF’s in market which tracks different indexes like Nifty , Nifty 500 .

Regarding gold returns , yes .. over long term gold has not returned more than 7-8% .. Only in last 5 yrs gold has outperformed its history .

Manish

Reply

9 Srinivas January 29, 2010 at 4:07 pm

Thanks. I was thinking Index fund is same as index ETF.
By the way, which are the Index ETF available in India? Any links?

Reply

10 manish January 30, 2010 at 1:04 am
11 Jagbir January 14, 2010 at 11:58 pm

excellent list, manish. where floating rate fund accommodate here… under Debt Funds category?
.-= Jagbir´s last blog ..Setting up mutiple MySQL Database servers on a single linux machine =-.

Reply

12 manish January 15, 2010 at 3:07 am

Jagbir

I appreciate your suggestions , however I am not finding a good explaination of “flaoting rate funds” , can you explain it to me in 2-3 lines in short ?

Manish

Reply

13 Srinivas January 15, 2010 at 8:07 am

Floating rate funds are the debt funds which invest in govt bonds or corporation and interest rate varies (floats) as per the current market rates. Floating rate funds are a better choice in a situation when interest rates are set to rise.
For more retails http://www.riversource.com/rvsc/global/docs/qw/floating-rate.pdf

Reply

14 manish January 15, 2010 at 10:16 am

Thanks for sharing this . As we are mainly discussing Indian markets . Do we have or plans to have floating rate funds in india ? Do you know of any such fund ?

Manish

Reply

15 Srinivas January 15, 2010 at 10:20 am

Yes. almost all the fund house has floating rate funds. they have always beat debt liquid plus in returns. I wonder how come you are not aware of floating rate funds.
refer valueresearchonline.com Debt->Floating rate option and search
refer http://www.mutualfundsindia.com/images/mfithoughts/20090713.pdf for returns analysis v/s debt liquid funds.

Reply

16 manish January 15, 2010 at 10:36 am

Thanks .

I now remember having seen them , but never got into details. Thanks for the link. I have added “floating rate funds” in the chart .

I have a query , You said that they generally beat liquid fund returns, what about the risk part ? Do their risk adjusted return also higher then liquid funds ? If yes , then it does not make sense to put money in debt funds at all .

We obviously have interest rate risk in floating rate funds , correct ?

Manish

Reply

17 Jagbir January 15, 2010 at 10:33 am

manish,

interestingly, I myself came to know about floating rate funds through jagoinvestor forum:

I’ve invested in hdfc floating rate fund long term through sip :)
thanks srinivas for explaining this.

-
Jagbir
.-= Jagbir´s last blog ..Setting up mutiple MySQL Database servers on a single linux machine =-.

Reply

18 manish January 15, 2010 at 10:40 am

Jagbir

Nice to know that . But why do you think these are better funds for long term ? I am not sure if they are ? Better go for pure equity funds ? Please clear my doubt ?

Manish

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19 Jagbir January 15, 2010 at 10:45 am

Manish,

I was searching for instrument to fulfill ‘short-term’ investment goal and investment in floating rate fund is part of that goal. My time frame is exactly 18 months and thus I found suggestion of investing in floating rate by srinivas appealing as it seems interest rates may rise in coming future. So now I’ve SIP in floating rate fund and RD in bank for 18 months, let’s see how it goes. I think equities are not so good for such short term goal… :)

-
Jagbir
.-= Jagbir´s last blog ..Setting up mutiple MySQL Database servers on a single linux machine =-.

Reply

20 Srinivas January 15, 2010 at 10:52 am

The link from mutualfundindia.com explains how floating rate funds are less volatile than liquid funds. I am sharing here one more very informative article from VR. http://new.valueresearchonline.com/story/h2_storyView.asp?str=7520

In jagbir’s case, his investment period was 18 months, which is not treated as long term hence equity is not suggested.

Reply

21 Srinivas January 15, 2010 at 11:15 am

Each fund has its own + and -. Here we are comparing only liquid v/s floating rate funds. Of course floating rate funds make better choice when interest rates are set to rise in future and they are less volatile compared to liquid funds and liquid funds annual expense ratio is more than floating rate funds.

Reply

22 Amit Kumar January 14, 2010 at 11:59 pm

My first impression on seeing the chart was WOW! A well thought off thing.
I guess it covers most of assets for common man.
You can have a miscellaneous High risk category which would have Forex, Structured Products etc. which are usually invested in by HNI.
As far as Silver is concerned I think its going to give better returns than gold because gold to me seems already overbought commodity while we are still to see ETFs & other such convenient products for Silver. Moreover Silver has a lot more industrial use than Gold.
.-= Amit Kumar´s last blog ..How to keep track of Mutual Fund Investments? =-.

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23 manish January 15, 2010 at 3:11 am

Amit

Thanks for the wonderful comment and your views on Silver . I never knew that Silver has so much to offer from Industrial point .

Regarding Forex and Structured products . I am not sure how much will it be understood by common man . Even I dont understand structured products :) . Most of the items on charts are common man products which they can invest in and even heard about at some point in time (not all , but most of them) . I would appreciate if you can talk more about how retail participation can happen in Forex and Structured products ?

and by the way , Silver ETF’s was something I heard last year . I guess it will be coming soon :)

Manish

Reply

24 Amit Kumar January 16, 2010 at 11:58 am

Yeh there were talks of launching Silver ETF by Benchmark MF, but I don’t know why its delayed. About structured products last year ICICI Pru came with debt investment option – SMART Fund – whose returns were linked to NIFTY performance, but I am not sure how was it received by Retail Investors. You can find some details about the same here – http://www.moneycontrol.com/news/mf-interview/will-icici-pru-smart-fund-appeal-to-retail-investors_353397.html
But then its a complex thing!
.-= Amit Kumar´s last blog ..Invest Rs 63,000 and save full Income Tax on Rs 1,00,000 under Sec 80C! =-.

Reply

25 manish January 16, 2010 at 1:47 pm

NIce link . let me see if I can write something on that front sometime :)

Manish

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26 Nikhil Shah January 15, 2010 at 12:24 am

Dear Manish

WOW …Excellent diagrom. Can you add the following products in the diagrom

1). Whole Life Insurance policies …
2). Govt.Bonds / RBI Taxable Bonds..
3). Deep Discount Bonds / Fixed Deposit..

all above mentioned items Should include In Debt Part Only…
Good Job…

Nikhil

Reply

27 manish January 15, 2010 at 3:12 am

Nikhil

Thanks for suggestions .

1. Lets consider it as Endowment policies only .
2. I have added “RBI Taxable Bonds”
3. FD was already there .

Can you throw some light on “Deep discount bonds” ? What are they ?

Manish

Reply

28 Nikhil Shah January 15, 2010 at 7:27 am

Dear Manish,

Here I am sending some basic information about Deep Discount Bonds…

Typically, a deep-discount bond will have a market price of 20% or more below its face value. These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.

These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.

I am also sending URL
http://www.raagvamdatt.com/Understanding-Deep-Discount-Bonds/229/

Thanks
Nikhil Shah

Reply

29 manish January 15, 2010 at 10:25 am

Thanks Nikhil

As we are mainly discussing Indian markets . Do we have or plans to have deep discount funds in india ? Do you know of any such fund ?

Manish

Reply

30 Nikhil Shah January 15, 2010 at 11:21 am

Dear Manish

I have invested for my son in ICICI Bank – Deep discount bond for a long term period …This bonds are tradeable in nse – Debt market…with thin volume..it should be invested in to vary financially sound companies only…At present this plans is not available….may come in future..

Nikhil

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31 manish January 15, 2010 at 3:46 pm

Nikhil

can we buy those deep discount bonds through Demat account as its tradable ?

Manish

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32 Nikhil January 15, 2010 at 5:05 pm

Manish

Yes ..You can buy those deep discount bonds through Demat account as its tradable From NSE Or BSE Stock Exchange…Debt Market module…

Nikhil

Reply

33 manish January 15, 2010 at 5:09 pm

Ok . let me try that .. I mean i have ICICI demat ,

Manish

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34 profitshastra January 15, 2010 at 8:07 am

I have provided some thoughts on asset allocation on my website:
It also has a blog on industry trends

Reply

35 manish January 15, 2010 at 12:48 pm

Thanks for the Links :)

What are your views on portfolio rebalancing ?

Manish

Reply

36 Nikhil Shah January 15, 2010 at 1:23 pm

Dear Manish

I have already made portfolio rebalancing – Calculation Excel Sheet ……if you interested pl write…

Pl note my e-mail Id :

nikhil201053@gmail.com
nikhil201053@rediffmail.com

Nikhil Shah

Reply

37 Manish Chauhan January 15, 2010 at 3:11 pm

NIkhil

send me the excel ..

Manish

Reply

38 vivek January 16, 2010 at 7:16 pm

hi nikhil
please send ur excel sheet to my id:
vivek.chowdhry@gmail.com
thanx

Reply

39 khalid January 15, 2010 at 8:32 am

Dear Manish,
Nice List for investments in Indian market. I think you included all corners of the investment world.
Thanks for sharing.
.-= khalid´s last blog ..Infosys Q3 FY10 : Net up 2.8% =-.

Reply

40 manish January 15, 2010 at 10:26 am

Thanks Khalid

Do you have any other things to add ? Do you think Derivatives (futures and options) should be added here from retail investors point of view ?

Manish

Reply

41 dhiraj January 15, 2010 at 9:56 am

This is an excellent diagram i can say, Thanks for this, I am regular visitors of your blog and really enjoy reading your article.

Reply

42 manish January 18, 2010 at 8:01 pm

Thanks Dhiraj

Nice to hear from you for the first time in comments . How old reader are you ?

Do you understand all the product discussed on the charts ?

Manish

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43 dhiraj January 19, 2010 at 10:01 am

I am just a 7 month old reader but swear I didn’t miss a single post….
As far as product is concern I understand the most of the product but one more help needed from you that if you elaborate Debt fund & Index fund little more with an examples.
Thanks

Reply

44 balbir2997 January 15, 2010 at 10:44 am

Thank you for such a nice details :)

Reply

45 manish January 15, 2010 at 12:49 pm

Balbir

Thanks for the comment . Did you see any new product on the chart which you were not aware of ?

Do you have idea about REIT and REMF ?

Manish

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46 Mukul January 15, 2010 at 7:39 pm

Hi Manish, Where and how can I get gold ETFs? What is the minimum investment?is it like SIP(means monthly or yearly)?
.-= Mukul´s last blog ..Decade recap =-.

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47 manish January 15, 2010 at 8:33 pm

Mukul

You can trade in Gold ETF from your demat account only . Minimum amount is mostly 1 gm of gold price because 1 unit if that much priced . We dont have SIP in that. you have to do it monthly .

manish

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48 Anand January 15, 2010 at 9:11 pm

Hi,
If I may, I would like to mention something. under equity head, Mutual funds and direct equities are depicted with same level of risk. I think we need to differentiate between these 2 (probably with different shades of same color). This would further justify your post about risk level in different asset classes.
These are my 2 cents of course.

Thanks
Anand

Reply

49 Manish Chauhan January 16, 2010 at 4:03 am

Anand

I accept that you are correct. I thought about this my self but then we have to include lot of shades for different funds because all the invesment options have different risk return profile . So what i did was categorise them with very broad categories .

Manish

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50 Mahesh January 15, 2010 at 10:43 pm

Manish,

Excellent overview of the complete list of investment avenues. Amazing as usual your articles. Hope you will be writing dedicated articles on few asset classes in the list which are not more familiar to us.

Regards, Mahesh

Reply

51 manish January 16, 2010 at 4:04 am

Mahesh

Thanks a lot . Which one of those you dont understand ? let me know

Manish

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52 Mahesh January 17, 2010 at 11:55 am

Hi Manish,

I am holding NRI status. Looking forward to invest some amount in bonds issued by GOI with locking period more than 3 years. Can you help in sharing the list of bonds issued by GOI for which NRIs are elegible ?
And what should be the procedure for this investment.

Thanks a lot in advance, Mahesh

Reply

53 manish January 17, 2010 at 1:48 pm
54 Sunil S Bhagat January 16, 2010 at 1:53 pm

Maybe to the Mutual funds u can sub categorize as Indian and foreign also.

Reply

55 manish January 16, 2010 at 2:01 pm

Sunil

But that would be a different kind of classification . Can you tell me where should I branch that out from ?

Manish

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56 vivek January 16, 2010 at 7:20 pm

hi manish
can i purchase foreign mutual funds, if yes ..then how. please elaborate

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57 manish January 16, 2010 at 8:58 pm

I am not sure on this . Will check out

Manish

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58 Sunil S Bhagat January 17, 2010 at 11:00 pm

it should branch from under Mutual funds. Ofcourse they would be debt as well as equity under the category. Index funds shouls be under Mfs,

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59 manish January 18, 2010 at 4:30 pm

Sunil

Index funds are already under MF .

Manish

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60 Marshal January 18, 2010 at 12:45 pm

Hi manish,

Very nice chart, but what is reason of gold coming under category of “Safe”?

Marshal

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61 manish January 18, 2010 at 4:31 pm

Marshal

We have considerd all the investment from historical return point of view . Generally people buy GOLD for long term and gold is considered safe from that point . Dont look at the returns from last 4-5 yrs .

manish

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62 Rajesh January 18, 2010 at 6:03 pm

HI Manish,

Another one more excellent informative article from you. Thank you very much for that.

These days I used to heard about “ETF-Gold Funds/Investments”. If you could put some light on that topic or share some resources that would be great.

Thank Again.

Rajesh

Reply

63 Manish Chauhan January 18, 2010 at 7:33 pm

Rajesh

nice to hear from you in the first comment . Keep commenting :)

ETF are the new type of instrument which are very effective and should be used by everyone . they are popular in US but gaining popularity in India now , see : http://www.jagoinvestor.com/2008/08/what-are-etfs-etfs-are-basket-of.html

Gold Funds are mutual funds which invest in gold mining companies , Its different then investing in GOLD : http://www.jagoinvestor.com/2008/09/gold-funds-what-are-alternatives-to.html

We also have GOLD ETF’s as investment option in GOLD .

Manish

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64 Rajesh January 19, 2010 at 4:20 pm

Thanks Manish for sharing these links which are very much informative.

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65 manish January 19, 2010 at 4:27 pm

Rajesh

You can invest in Gold ETF’s using your Demat account only . Make sure you have a demat account if you want to invest .

Manish

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66 Rajesh January 19, 2010 at 7:47 pm

Okay. Got it :)

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67 Rahul January 19, 2010 at 6:13 pm

Manish,

Don’t you think commodities also shd be in yellow with Real Estate.

Reg’s

Reply

68 manish January 20, 2010 at 12:54 am

Rahul

Looks like you are considering “Commodities” as “commodity trading” . thats not the case . we are considering investment options like GOLD , Silver etc only and that too for long term , and in that case they have proved to be safer investments .

Am i Correct ?

Manish

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69 Prashant January 27, 2010 at 4:59 pm

Hi Manish,
nice to see very informative chart. i need to save 1 lac in next 6-7 months for House. Could you pls tell me where should i invest of 15k montly to get good return with moderate risk.
I am thinking of top debt MF to invest? Please advise.Thank you.

Reply

70 manish January 29, 2010 at 3:45 pm

Prashant

You should not expect lots of return as the time frame is just 6-7 months . I would say anything which is very liquid and less risky should suit you .. Debt funds is good idea .

See the list of debt funds I have mentioned .

Manish

Reply

71 Pallav desai February 11, 2010 at 12:26 pm

Thanks for helping us lot.We will get much benifit by using ur own idea as an expert view.

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72 Manish Chauhan February 11, 2010 at 3:26 pm

Pallavi

Nice to know that you are ready to plan things on your own . thats good . Let me know if there is any thing required .

Manish

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73 Rahul February 13, 2010 at 4:17 pm

Hi Manish..
really nice effort..
the best thing about ut posts/advice/columns is that they always have an India focus and a practical approach for the common investors. Great going..
BTW, i ve been reading for the last 2-3 months, but could understand most of the instruments..speaks a lot about ur simple and practical explanations..
thanks

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74 Manish Chauhan March 20, 2010 at 1:49 am

Rahul

thanks for your comment .

Manish

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75 ashokan arunachalam April 7, 2010 at 6:08 pm

Good work, will be nice if you could also include Nifty Linked Debentures (Structured Products) and Portfolio Management Services (PMS) as a part of this pictorial diagram.

Reply

76 Manish Chauhan April 7, 2010 at 8:37 pm

ashokan

thanks for suggestions :) . I think that would be little more on higher side. Lets keep a list of more widely used things .

Manish

Reply

77 milind April 27, 2010 at 5:11 am

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