Abstract: There are several alternative avenues by which retail investors can transform their savings into productive investment. They can invest in money market, share market, derivative market, bond, mutual fund, insurance, gold and bullion and real estate. The objective of a rational investor is to maximize the return subject to a given risk or minimizing the risk subject to a given return. Different investment instruments can be compared in terms of return, risk, tax shelter, marketability and convenience of transaction. The article discusses different attributes of investment on the basis of which an investment is evaluated. The crucial attributes are rate of return, risk, marketability, tax shelter, convenience etc. It describes different types of money market instruments. It provides basic guidelines to the investor how to invest in share market so that subject to minimum risk, a moderate return is ensured. Before investing in a stock, technical analysis and fundamental analysis must be done so that it is easy to conclude whether the share is under priced or overpriced. The article presents the concept of different types of derivatives and it focuses on how derivatives can be correlated with the shares by which hedger can hedge their risk, speculator can earn profit and arbitrageur can earn risk less profit due to price differentials. It depicts different types of alternative investment strategies such as mutual funds, bonds, non marketable financial assets, real estate market as well as market of precious stones. It shows how decision tree can be used in formulating the investment decision.
Publication Year: 2008
Publication Date: 2008-01-01
Language: en
Type: article
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