4.2 Types of Investments

You now know that investments lead to asset creation. Assets include anything that you own and has a monetary value. While there are numerous investment products and modes, we can broadly classify investments into physical assets and financial assets.

Investment in Physical Assets:

As the name suggests, physical assets are those investments that have an actual, physical form. Some examples of investment in physical assets are as follows.

Investment in Physical Assets

Assets:

As the name suggests, physical assets are those investments that have an actual, physical form. Some examples of investment in physical assets are as follows.

  • Real Estate- Real Estate includes property like apartments, buildings, land, office premises, etc. These are generally long-term investments.
  • Jewellery-  Indians have an affinity towards the purchase of gold jewellery for religious, sentimental and cultural reasons. You must have seen your mother purchasing gold at weddings, festivals. This gold is your investment and use for borrowing money.
  • Commodities- Certain commodities can be purchased and traded in the commodities market—for example, silver, agriculture products, bitcoins or any virtual currency.

Investment in Financial Assets:

Financial assets generally don’t have a physical form. However, they have some documentary evidence of ownership and monetary value. Some examples of financial assets are as follows.

  • Bank Products- Deposit products like savings accounts, FDs, RDs, etc., offer returns in the form of interest. Hence, these products are investments.
  • Market Linked Products- Financial assets traded in regulated markets like equities or stocks, bonds, mutual funds, foreign exchange, etc., are also investments.
  • Government Schemes and Products- The Indian Government has certain investment products and schemes that promote the growth of wealth. Some examples are Public Provident Fund (PPF), Employees’ Provident Fund (EPF), Sukanya Samriddhi Yojana (SSY), Senior Citizens Savings Scheme, etc.

The types of investments listed are illustrative and not exhaustive. It is vital to assess your risk appetite and the returns to develop an investment portfolio best suited to achieve your financial goals.

THINK ABOUT IT!

In how many products listed above have your parents invested? Could you think of any other investment products?