CONVENTIONAL INVESTMENT AVENUES
Conventional investment made by most families are on the following assets:
a) Gold jewellery,
b) Chit funds,
c) Silver and other precious stones,
d) Saving in Banks and Post Offices,
e) Saving in Cooperative banks and
f) Land & property.
Though all the asset class listed above would not qualify as investment, we shall make a beginning with this list. Each type of asset class has its own merit and demerit which we shall review here.
Investment in Gold is easy. It can be adapted to the fund available to invest in gold, can be bought from the local jeweller, can be exchanged or sold in case immediate cash is needed. Normally gold price has shown an overall increasing trend with every passing year, though it may fluctuate midway, as per changes in the market. The down side in investment in gold jewellery is that while you purchase or sell them, you stand to loose money on making charges and wastage which varies from 7 to 22% of the metal cost. Further the purity of the metal is not assured unless you buy it from a reputed outlet and have the jewel purchased, verified at some other point. Lastly the jewellery must be protected and kept safely.
Chit funds are run by members from the family or friends circle. It is also run by chit fund companies. The financial credibility of such agencies are generally not verified by the investor. He rather goes by the trust factor gathered from informal sources, more through word of mouth than any accredited source. In case the agency fails or becomes bankrupt the investor runs the risk of loosing his money. Other wise all is well that ends well.
While Silver has a re-sale value precious stones are more valued for their perceived value by the owner. The value comes rather from its possession than from its re-sale value, unless it is a very costly stone.
Saving in banks and Post Offices are done more because of the trust factor and the ease of reaching the service point which are normally available in the neighbourhood. Since the trust has built over years by the PSU banks and Post offices, which are government backed, it has ready acceptance from the investors. Saving in Cooperative banks and Private banks may yield slightly higher rate of interest. The plus point in investing in banks is that based on surplus fund available it can be invested in the bank and withdrawn as and when need arises.
Investment in land and property is generally believed to yield very good returns once we stay invested for a long period.The investor stands to gain by the appreciation of the property value and yield in terms of rent. The factor to be considered is that investment in such assets demands huge investment in one lot, which has to be accumulated over a long period. Purchase done with bank loan should be evaluated for its over all returns in terms of interest out flow to the bank, value appreciation of the property and annual inflation. Wrong investment can result in a huge loss. Pre-investment information should be gathered to evaluate the asset. Generally the price quoted is not regulated while buying or selling such property.The middle man would build in his margin. Credibility of the vendors needs to be thoroughly verified to ensure that the investor does not loose his money. Once purchased, the property should be safe guarded against land grabbers and other un-scrupulous elements who would forge the documents and sell the property to others with out the owner's knowledge which would result in disputed claims and litigation.
a) Gold jewellery,
b) Chit funds,
c) Silver and other precious stones,
d) Saving in Banks and Post Offices,
e) Saving in Cooperative banks and
f) Land & property.
Though all the asset class listed above would not qualify as investment, we shall make a beginning with this list. Each type of asset class has its own merit and demerit which we shall review here.
Investment in Gold is easy. It can be adapted to the fund available to invest in gold, can be bought from the local jeweller, can be exchanged or sold in case immediate cash is needed. Normally gold price has shown an overall increasing trend with every passing year, though it may fluctuate midway, as per changes in the market. The down side in investment in gold jewellery is that while you purchase or sell them, you stand to loose money on making charges and wastage which varies from 7 to 22% of the metal cost. Further the purity of the metal is not assured unless you buy it from a reputed outlet and have the jewel purchased, verified at some other point. Lastly the jewellery must be protected and kept safely.
Chit funds are run by members from the family or friends circle. It is also run by chit fund companies. The financial credibility of such agencies are generally not verified by the investor. He rather goes by the trust factor gathered from informal sources, more through word of mouth than any accredited source. In case the agency fails or becomes bankrupt the investor runs the risk of loosing his money. Other wise all is well that ends well.
While Silver has a re-sale value precious stones are more valued for their perceived value by the owner. The value comes rather from its possession than from its re-sale value, unless it is a very costly stone.
Saving in banks and Post Offices are done more because of the trust factor and the ease of reaching the service point which are normally available in the neighbourhood. Since the trust has built over years by the PSU banks and Post offices, which are government backed, it has ready acceptance from the investors. Saving in Cooperative banks and Private banks may yield slightly higher rate of interest. The plus point in investing in banks is that based on surplus fund available it can be invested in the bank and withdrawn as and when need arises.
Investment in land and property is generally believed to yield very good returns once we stay invested for a long period.The investor stands to gain by the appreciation of the property value and yield in terms of rent. The factor to be considered is that investment in such assets demands huge investment in one lot, which has to be accumulated over a long period. Purchase done with bank loan should be evaluated for its over all returns in terms of interest out flow to the bank, value appreciation of the property and annual inflation. Wrong investment can result in a huge loss. Pre-investment information should be gathered to evaluate the asset. Generally the price quoted is not regulated while buying or selling such property.The middle man would build in his margin. Credibility of the vendors needs to be thoroughly verified to ensure that the investor does not loose his money. Once purchased, the property should be safe guarded against land grabbers and other un-scrupulous elements who would forge the documents and sell the property to others with out the owner's knowledge which would result in disputed claims and litigation.
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