When we talk about Equities, everybody is scared!
Everyone feels that it is only for Bankers or Financial experts to deal with!
No...literally not. I will try to explain equities as simple as possible here.
In Life, we live to earn money and we need to money to live, so both are relative in one sense.
Work turns to money, money turns to love, love turns into relations, relations turn to family.
Money can be grown or saved in two types, other than work.
1. Debt
2. Equities
1. Debt - These are standard rates provided by a well know guarantor probably by a Government or Society or by a Financial Institution with limited liability.
2. Equities - These are variable rates provided by a Private or Individual body governed by the rules laid by the Government or Society.
Classifying Debt & Equities
Debt - Bonds, Saving Bank Account, Saving Certificates, Tax Saver Bonds, Infrastructure Bonds, National Tax Schemes, Pension Schemes, where the money is used for betterment of a Country or an Society. Since they don't have income, they provide standard rates or less rates compared to the Market.
Equities - Investing in Stocks or idea or an product or technology or line of business is which the income is variable due to market conditions, product success or economic conditions, are usually high or low compared to the standard rates.
Examples of Debt : Bonds, NSC, PPF, IRS, VPF, Gold, Real Estate etc...
Examples of Equity : Stocks, Company etc...
Everybody will say Gold or Real Estate is not debt. Yes, it was. Now, due to economic conditions change, growth in population, need of safe haven, these products have changed from Debt to Equity.
Few years back, crude oil was considered to be the best equity, now due to economic conditions it has lost its lustre.
There are usually three type of Investment Profiles..
1. A person who spends
2. A persons who spends & saves money
3. A person who saves money & make others to spend
1. Who spends - He actually spends, in-turn someone earns the money from him.
2. Spends & Saves - He spends what he wants and he saves, for spending again by someone else
3. Saves & Others Spend - He saves and saves, ensuring he spends during the later stage of his life or someone spends after him.
What money we spend or saved, either it is earned by us or spend by us or will be spend by someone else.
Debt is easy to Invest. A layman can know the product ex: Gold or House. If he wants a two or three bedroom house, he will go for it, but he does have specifications. These specifications are known by us, from birth. Like a house will have Front Room, Bed Room, Dining Hall, Balcony, Bathroom [attached / common] etc...
Equities is an Mirage. Everybody is scared, because they have the feel that it is dynamic say it has ups & downs. The market condition changes, so does its value.
Equities are similar to buying a house. You need to check for the company profile, product, idea, management, skills, technology. These are the specifications that are needs to be followed, similar to a house purchase.
To make Equities more simple, financial experts have introduced Mutual Funds.
Mutual Fund is a body which manages the funds we invest through them. They invest in Debt & Equity related markets making our life simple but still rewarding with what we need 'Extra Money'.
Mutual Fund are classified into multiple fund type..
1. Debt funds
2. Equity funds
3. Balanced funds [mix of Debt & Equity fund]
4. Thematic fund [specific to industry or product or concept]
If you are a spender - invest in Equity based mutual fund
If you are a person who spends & saves money - invest in Balanced Mutual Funds
If you save, makes others to spend - invest in Debt mutual funds
Multiple vendors or bodies are available across the globe who manage these kind of funds. Recommend you to rely on your country specific mutual fund manager, who will guide you based on your spending appetite.
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