List of Different Asset Classes for Investing
POSTED BY ON January 14, 2010 COMMENTS (77)
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
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.
Manish,
https://www.jagoinvestor.com/2008/04/gold-as-investment.html link is broken
Please fix it
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.
ashokan
thanks for suggestions 🙂 . I think that would be little more on higher side. Lets keep a list of more widely used things .
Manish
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
Rahul
thanks for your comment .
Manish
Thanks for helping us lot.We will get much benifit by using ur own idea as an expert view.
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
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.
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
Manish,
Don’t you think commodities also shd be in yellow with Real Estate.
Reg’s
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
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
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 : https://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 : https://www.jagoinvestor.com/2008/09/gold-funds-what-are-alternatives-to.html
We also have GOLD ETF’s as investment option in GOLD .
Manish
Thanks Manish for sharing these links which are very much informative.
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
Okay. Got it 🙂
Hi manish,
Very nice chart, but what is reason of gold coming under category of “Safe”?
Marshal
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
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,
Sunil
Index funds are already under MF .
Manish
hi manish
can i purchase foreign mutual funds, if yes ..then how. please elaborate
I am not sure on this . Will check out
Manish
Maybe to the Mutual funds u can sub categorize as Indian and foreign also.
Sunil
But that would be a different kind of classification . Can you tell me where should I branch that out from ?
Manish
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
Mahesh
Thanks a lot . Which one of those you dont understand ? let me know
Manish
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
Mahesh
https://secure.icicidirect.com/trading/rrb/RRB_FAQ.asp#a2
Manish
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
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
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 =-.
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
Thank you for such a nice details 🙂
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
This is an excellent diagram i can say, Thanks for this, I am regular visitors of your blog and really enjoy reading your article.
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
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
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% =-.
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
I have provided some thoughts on asset allocation on my website:
It also has a blog on industry trends
Thanks for the Links 🙂
What are your views on portfolio rebalancing ?
Manish
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
NIkhil
send me the excel ..
Manish
hi nikhil
please send ur excel sheet to my id:
vivek.chowdhry@gmail.com
thanx
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
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
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
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
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
Nikhil
can we buy those deep discount bonds through Demat account as its tradable ?
Manish
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
Ok . let me try that .. I mean i have ICICI demat ,
Manish
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? =-.
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
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! =-.
NIce link . let me see if I can write something on that front sometime 🙂
Manish
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 =-.
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
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
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
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.
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
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 =-.
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
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 =-.
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.
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.
Excellent diagrom. Can you add the following products in the diagrom
1) EPF
2) Balanced Funds
3) NPS
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
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
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
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 https://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.
Srinivas
It looks like a great site .. I will surely see the site and come up with something 🙂
Manish
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%.
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
Thanks. I was thinking Index fund is same as index ETF.
By the way, which are the Index ETF available in India? Any links?
Srinivas
Here is the link : https://www.jagoinvestor.com/2008/08/what-are-etfs-etfs-are-basket-of.html
Manish