1. Direct Stock Investment
One can invest directly in stocks traded in secondary markets through stock exchanges such as Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). For this one can invest in shares after opening a demat account through authorized brokerage firms. One can also reduce the risk factor by investing in stocks across different market capitalization and sectors.
Risk: Market price volatility is a hallmark of stocks. Therefore, there is a high possibility of fluctuations in investment capital and returns. However, investing in fundamentally sound stocks over a very long period of time can be seen to yield very high returns.
2. IPO
A company has to complete the process of IPO (Initial Public Offering) in order to get listed on any stock exchange. As part of this, the company’s shares should be sold in the market. The shares of the company are transferred to the public at a fixed price. Through this, the public also gets a chance to own a part of the company’s capital. In this way, the shares obtained through IPO can be sold after being listed on the stock exchange.
Risk factor: Just applying for the IPO does not necessarily mean getting the shares. You can get nothing in share allotment. Similarly, there is no guarantee of profit when listing shares. However, do not assume that the price at which the shares are issued in the IPO will be its lowest price. Sometimes it is possible to double and go below the issue price. The market price of shares in the secondary market depends on several factors including demand and valuation.
3. Small and Mid Cap Equity Mutual Fund
While there are equity funds in various categories, mutual funds in the small and mid-cap category schemes are subject to high volatility and are capable of yielding very high returns. These are mutual funds that mainly invest in mid and small cap stocks. Meanwhile, as per the definition of the market regulatory agency SEBI, the mid-cap category stocks are those that are ranked from 101 to 250 in the list based on the market value (market cap) of the companies. Those above 250 in the list are considered small cap stocks.
risk factor: Generally mid-cap and small-cap stocks are companies at different stages of growth. So the risk of any setback is high. However if the business grows well it can earn high returns. Meanwhile, Matrema should invest in such funds according to their risk taking capacity.
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4. Equity Linked Savings Scheme
An Equity Linked Savings Scheme (ELSS) is an equity mutual fund that invests at least 80 per cent in equity or equity-based instruments. ELSS is presented in both open-ended and closed-ended categories. Tax exemptions are also available for investment in it.
risk factor : There is no guarantee of high return from ELSS scheme after completion of lock-in period. In case of poor performance, the scheme can be continued or not after an in-depth evaluation.
