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Strategic Investing: The Role of Asset Classes in Financial Planning

An Asset Class in the Indian stock market (and in general investing) means a group of investments that behave similarly. Each asset class has its own risk and return profile. When people invest, they usually diversify across asset classes to balance risk.

In the Indian context, the major asset classes are:

1. Equity (Stocks) 

  • It refers to the ownership in a company.
  • Examples include the Shares of companies like Reliance, TCS, Infosys. 
  • High risk, possibly higher returns. 

2. Debt (Fixed Income Instruments) 

  • It has government bonds, corporate bonds, debentures. 
  • Less risk involved than equities and fixed returns. 
  • Examples: Government Securities (G-Secs), NCDs (Non-Convertible Debentures). 

3. Mutual Funds: 

  • Mutual fund is a pooled investment vehicle managed by professionals. 
  • It can invest in equity, debt, or hybrid (mix of both) investments. 
  • It’s perfect for retail investors who prefer diversification.

 4. Derivatives:

  • Financial contracts built on stocks, indices, or commodities, based on some underlying assets.
  • It involves Futures and Options.
  • Highly often used for Hedging or Speculation-high risk. 

5. Commodities:

  • Tradeable physical goods; goods that range from gold, silver, crude oil, and other agricultural products. 
  • These commodities are usually traded through MCX (Multi Commodity Exchange) and NCDEX. 
  • Helps diversify portfolio against purely financial instruments. 

6. Real Estate Investment Trusts (REITs):

  • Provides an opportunity for small retail investors to invest in income-generating real estate. 
  • Listed on stock exchanges.
  • For example, Embassy Office Parks REIT. 

7. Infrastructure Investment Trusts (InvITs) : 

  • The InvITs are similar to REITs but focused on infrastructure projects like highways, power transmission, etc. 
  • It offers regular income along with capital appreciation. 

8. Exchange-Traded Funds (ETFs) : 

  • Such indices include Nifty or Sensex, commodities, or sectors. 
  • They can be traded by public stock exchanges. 
  • Its low-cost passive investment vehicles.

9. Currency: 

  • Market (Forex) Trading of currencies through pairs such as USD/INR, EUR/INR on the exchanges like, NSE and BSE.
Asset classes

For further information, please reach out to Chanakya Investments.

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