CashCow Chapter 3.4 – Investment Options

Your portfolio need not be restricted to investments in stocks and intraday trading only. You can have a healthy mix of other assets like bonds, ETF, mutual funds, real estate, or affiliate websites in your portfolio.

You need to choose the investment options based on your goals, risk capacity, and understanding of the assets to balance your portfolio along with stock investment and trading.

Suppose, if you have an understanding of how the affiliate website works then you can invest 10% of your investment portfolio in it. The rest of the 90% can be distributed for investment in mutual funds, stocks, and intraday trading.

Different Investment Options

You can try different combinations of assets that suit you to achieve your investment goals.

#1. Corporate Bonds

Corporate bonds are debt securities that carry a fixed interest rate. They are issued by companies to raise funds for various needs. It is like a company taking loan funds from various retail investors rather than from the bank.

In return, the company pays you back the principal amount and the interest.

The corporate bonds carry a credit rating, that indicates the risk associated with the company and the bonds. 

Corporate bonds are rated AA and A that signifies a moderate level of risk and that is why they offer slightly higher interest rates in the range of 10% to 14%.

Corporate bonds are ideal when you have an understanding of the company’s business and creditworthiness. 

You can use the “Golden Pi” platform to invest in corporate bonds online. The investment amount for corporate bonds is approximately Rs. 2 Lakh and above.

#2. Debentures (Non-Convertible Debentures)

Debentures are fixed interest rate bearing instruments issued by corporates to accumulate debt funds for their business purpose.

Unlike bonds, debentures are not backed by collateral securities and are issued and purchased solely based on the reputation and creditworthiness of the issuing company.

You need to check the credit rating and should invest in NCDs of reputed, large and stable companies. You can expect a fixed interest rate of 9.5% to 13% on NCDs.

You can use the Zerodha Coin platform or Golden Pi platform to invest in NCDs online.

#3. Mutual Funds Schemes

Mutual funds are pooled money that is collected by several investors (also known as mutual fund subscribers). The pooled money is then managed by the mutual fund asset management company (AMC) on behalf of the investors.

The AMC appoints a fund manager who is an expert with years of experience in managing funds. 

The fund manager takes care of market research, allocation of pooled funds, investment, tracking on your behalf. For all the fund management and expenses, AMC charges you fees.

Mutual fund investment is best when you do not have the expertise and the time to do market research and track your investments.

You can start a mutual fund investment from Rs. 500 using online platforms like Scripbox and ETMoney.

#4. Exchange-Traded Funds (ETF)

Exchange-traded funds are mutual fund units that are listed on the stock exchange and can be traded regularly like stocks.

ETF offers you all the benefits of the mutual fund scheme and the flexibility to exit your investments immediately by selling on the stock exchange.

You should select an ETF investment option if you want immediate liquidity. The minimum investment is Rs. 10 or the minimum number of units traded. 

You can use your stock broker investment platform to invest in an ETF.

#5. Cryptocurrencies

Cryptocurrencies are digital currencies or virtual currencies that can be used to buy goods and services or used as a medium of exchange. 

The digital currencies are secured by cryptography and work on blockchain technology.

Bitcoin, Ethereum, Ripple and Litecoin are few examples of cryptocurrencies. 

Cryptocurrencies are a new investment option and are for people who can understand blockchain and have high risk-taking capacity because the cryptocurrency has wide fluctuations.

You can use a Crypto exchange platform like WazirX to invest in cryptocurrencies.

#6. Real Estate

Real estate investment can be in the form of rental property or commercial real estate. You invest in a residential property or in a commercial shop or office space and then give it on rentals to earn regular cashflows.

While investing in real estate you look for value appreciation over a period of time and till then generate income through rentals.

However, factors like local developments, infrastructure, property location, and the amenities nearby affect the valuation of investments in real estate.

The real estate investments are illiquid and take time, money, and effort to keep the property in good condition. You can start real estate investments by approaching your local property dealer or online from property websites like 99 acres.

#7. Domain Names

A domain name is the address of a website that you type in Google to find a particular website, which can be of a company, government organization, local authority, blog, or a marketplace.

For example, tatamotors.com is a domain name for Tata Motors Limited or tcs.com is the domain name of Tata Consultancy Services Limited.

Let us suppose you bought a domain name xyz.com which in the future closely resembles a business XYZ. The domain is now potentially the identity and carries the brand of that business.

Naturally, the business would like to have such a domain name that people can associate with and remember easily. 

But the problem for the company is that you already hold that domain name which it wants and that is how the domain name gets valuable.

The company may approach you and then you can sell the domain name at a high value.

You should risk investment in domain names only when you understand what all domain names are preferred by the businesses. 

Other factors that you need to know are the extensions that can be valuable. Domain name investment involves the cost of renewal fees.

After you are familiar with the intricacies of domain name investing you can start investing using the domain registrar.

#8. Affiliate Websites

An affiliate website is a collection of webpages (can be in the form of a blog) that is built to engage visitors and share information about the various products and services that they are looking for.

You do not have to create your own products to promote on an affiliate website, but the products are from the companies and the brands.

The affiliate website job is to help readers make informed buying decisions and then sends him/her to the appropriate marketplace like Amazon where he can find and purchase the much-needed product easily.

In return, the affiliate website owner earns a commission for the purchase made by the reader sent by his website.

Before making an investment in affiliate websites you need to understand the factors that impact affiliate marketing, the requirements of creating an engaging affiliate website, affiliate networks and their commission structure.

If you have time then you can start an affiliate website from scratch or if you have funds then you can buy a running affiliate website rather than building from scratch.

#9. P2P Loans

Peer to Peer (P2P) loans can be made through the lending platform like Faircent and Lendenclub. 

Using the platform you can lend money to individuals and businesses for their various requirements. P2P lending is helpful for people who do not want to borrow from friends and banks.

The P2P platform matches the borrowers and the lenders, sets guidelines and to an extent provides investment assurance.

The returns from P2P lending vary up to 30%. You should take P2P investments only when you understand the mechanism and are ready to take the risk of losing money in exchange for high returns.

Advice on creating Investment Portfolio

You should start investing in instruments that you are already familiar with and then try to learn and test other options.

Having multiple income streams helps you balance your investment portfolio, diversifies the risk of dependency on a single option, and keeps on track your investment goals for financial freedom.

Now it’s your assignment time

You have to make your investment allocation plan. You have to define the investment amount in the different investment option and return goal from the following

  • Safe investment
  • Growth return investment
  • Hypergrowth investments

The next module “Side Hustle” will start. Before that, you need to complete all your pending assignments if any.

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